Solstad Farstad ASA (OB:SOFF), an energy company based in Norway, led the OB gainers with a relatively large price hike in the past couple of weeks. 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? Let’s examine Solstad Farstad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Solstad Farstad
What is Solstad Farstad worth?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Solstad Farstad’s ratio of 0.38x is trading slightly below its industry peers’ ratio of 1.15x, which means if you buy Solstad Farstad today, you’d be paying a relatively reasonable price for it. And if you believe Solstad Farstad should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, it seems like Solstad Farstad’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Solstad Farstad?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. With profit expected to grow by 22.63% over the next couple of years, the future seems bright for Solstad Farstad. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SOFF’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 SOFF? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SOFF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SOFF, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Solstad Farstad. You can find everything you need to know about Solstad Farstad in the latest infographic research report. If you are no longer interested in Solstad Farstad, you can use our free platform to see my list of over 50 other stocks with a high growth potential.