When Should You Buy ELQ S.A. (WSE:ELQ)?

While ELQ S.A. (WSE:ELQ) might not have the largest market cap around , it saw a significant share price rise of 92% in the past couple of months on the WSE. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at ELQ’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for ELQ

What Is ELQ Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. We’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 19.31x is currently well-above the industry average of 15.22x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that ELQ’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from ELQ?

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. In ELQ's case, its revenues over the next couple of years are expected to double, indicating an incredibly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ELQ’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ELQ should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ELQ for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ELQ, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about ELQ as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for ELQ (of which 2 are concerning!) you should know about.

If you are no longer interested in ELQ, 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.