Servizi Italia S.p.A. (BIT:SRI), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €2.39 at one point, and dropping to the lows of €2.12. 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 Servizi Italia's current trading price of €2.26 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 Servizi Italia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Servizi Italia
What's the opportunity in Servizi Italia?
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. 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 25.06x is currently trading slightly below its industry peers’ ratio of 27.39x, which means if you buy Servizi Italia today, you’d be paying a reasonable price for it. And if you believe that Servizi Italia should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Servizi Italia’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Servizi Italia?
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. Servizi Italia's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? SRI’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 track record of its management team. Have these factors changed since the last time you looked at SRI? 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 SRI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SRI, 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'd like to know more about Servizi Italia as a business, it's important to be aware of any risks it's facing. When we did our research, we found 5 warning signs for Servizi Italia (1 is a bit unpleasant!) that we believe deserve your full attention.
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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.
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About BIT:SRI
Servizi Italia
Provides wash-hire and sterilization services in Italy, Turkey, and Brazil.
Fair value with mediocre balance sheet.
