Is SBI FinTech Solutions Co., Ltd. (KOSDAQ:950110) Potentially Undervalued?

SBI FinTech Solutions Co., Ltd. (KOSDAQ:950110), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the KOSDAQ. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on SBI FinTech Solutions’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for SBI FinTech Solutions

What is SBI FinTech Solutions worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 SBI FinTech Solutions’s ratio of 19.2x is trading slightly below its industry peers’ ratio of 19.97x, which means if you buy SBI FinTech Solutions today, you’d be paying a decent price for it. And if you believe that SBI FinTech Solutions 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. Although, there may be an opportunity to buy in the future. This is because SBI FinTech Solutions’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 kind of growth will SBI FinTech Solutions generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 94% over the next couple of years, the future seems bright for SBI FinTech Solutions. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? A950110’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 A950110? 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 A950110, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for A950110, which means it’s worth diving deeper into 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 SBI FinTech Solutions as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for SBI FinTech Solutions (of which 1 is a bit concerning!) you should know about.

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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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