When Should You Buy Scales Corporation Limited (NZSE:SCL)?

Scales Corporation Limited (NZSE:SCL), which is in the food business, and is based in New Zealand, saw significant share price movement during recent months on the NZSE, rising to highs of NZ$4.95 and falling to the lows of NZ$4.22. 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 Scales’s current trading price of NZ$4.38 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 Scales’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What’s the opportunity in Scales?

Great news for investors – Scales is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is NZ$7.75, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Scales’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Scales look like?

NZSE:SCL Future Profit January 12th 19
NZSE:SCL Future Profit January 12th 19
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. 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 a double-digit 15% over the next couple of years, the outlook is positive for Scales. 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? Since SCL is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on SCL for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SCL. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Scales. You can find everything you need to know about Scales in the latest infographic research report. If you are no longer interested in Scales, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.