When Should You Buy Unieuro S.p.A. (BIT:UNIR)?

While Unieuro S.p.A. (BIT:UNIR) might not be the most widely known stock at the moment, it led the BIT gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present 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? Today I will analyse the most recent data on Unieuro’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Unieuro

What's the opportunity in Unieuro?

Good news, investors! Unieuro is still a bargain right now according to my price multiple model, which compares 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 Unieuro’s ratio of 6.37x is below its peer average of 18.43x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. Although, there may be another chance to buy again in the future. This is because Unieuro’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Unieuro look like?

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. However, with an expected decline of -0.9% in revenues over the next year, short term growth isn’t a driver for a buy decision for Unieuro. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although UNIR is currently trading below the industry PE ratio, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to UNIR, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on UNIR for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for Unieuro and we think they deserve your attention.

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

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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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