Is It Time To Consider Buying Italmobiliare S.p.A. (BIT:ITM)?

While Italmobiliare S.p.A. (BIT:ITM) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the BIT, rising to highs of €30.95 and falling to the lows of €27.15. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Italmobiliare's current trading price of €28.70 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Italmobiliare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Italmobiliare

Is Italmobiliare still cheap?

Italmobiliare is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 33.28x is currently well-above the industry average of 23.67x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Italmobiliare’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect decent returns from Italmobiliare?

What kind of returns can we expect from Italmobiliare in the future? It’s one thing to get a stock at a low price, but the quality of the company is even more important, as its stock may be cheap or expensive for a reason. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. Italmobiliare is expected to return 5.7% of your investment in the next couple of years if you buy the stock today. This is a pretty average return, which doesn’t significantly add much to the case for owning the stock.

What this means for you:

Are you a shareholder?ITM’s price has risen beyond its industry peers, while analysts foresee a relatively muted future return. This begs another question – could now be the time to sell the stock? If you believe ITM should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ITM for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means there’s no upside from mispricing. Furthermore, the low expected return doesn’t help build the case for a “buy”. However, there are also other important factors we haven’t considered today, such as the financial strength of ITM, which could help explain the relatively high PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Italmobiliare at this point in time. You'd be interested to know, that we found 2 warning signs for Italmobiliare and you'll want to know about these.

If you are no longer interested in Italmobiliare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you’re looking to trade Italmobiliare, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.