Is Now The Time To Look At Buying Sanlorenzo S.p.A. (BIT:SL)?

While Sanlorenzo S.p.A. (BIT:SL) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the BIT over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Sanlorenzo’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Sanlorenzo

What's the opportunity in Sanlorenzo?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Sanlorenzo’s ratio of 18.98x is trading slightly above its industry peers’ ratio of 16.28x, which means if you buy Sanlorenzo today, you’d be paying a relatively sensible price for it. And if you believe Sanlorenzo should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Sanlorenzo’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Sanlorenzo?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Sanlorenzo's earnings over the next few years are expected to increase by 52%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? SL’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SL? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SL, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SL, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Sanlorenzo, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Sanlorenzo you should know about.

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

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

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.