Why Europris ASA (OB:EPR) Could Be Worth Watching

While Europris ASA (OB:EPR) might not be the most widely known stock at the moment, it led the OB gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Europris’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Europris

What's The Opportunity In Europris?

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 10.09x is currently trading slightly below its industry peers’ ratio of 12.74x, which means if you buy Europris today, you’d be paying a decent price for it. And if you believe Europris 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. Furthermore, it seems like Europris’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Europris?

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 -5.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Europris. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? EPR seems priced close to industry peers right now, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on EPR, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on EPR for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 EPR should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Europris, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Europris and we think they deserve your attention.

If you are no longer interested in Europris, 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.