Is Now The Time To Look At Buying Elektroimportøren AS (OB:ELIMP)?

Elektroimportøren AS (OB:ELIMP), is not the largest company out there, but it received a lot of attention from a substantial price movement on the OB over the last few months, increasing to kr42.00 at one point, and dropping to the lows of kr22.70. 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 Elektroimportøren's current trading price of kr22.70 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 Elektroimportøren’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Elektroimportøren

What Is Elektroimportøren 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 Elektroimportøren’s ratio of 12.54x is trading slightly below its industry peers’ ratio of 13.76x, which means if you buy Elektroimportøren today, you’d be paying a reasonable price for it. And if you believe Elektroimportøren should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Elektroimportøren’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.

Can we expect growth from Elektroimportøren?

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 a negative profit growth of -6.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Elektroimportøren. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, ELIMP appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ELIMP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ELIMP for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ELIMP should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Elektroimportøren, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Elektroimportøren (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in Elektroimportøren, 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. 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.