Amica S.A. (WSE:AMC), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the WSE. 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 take a look at Amica’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Amica
Is Amica still cheap?
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. 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 Amica’s ratio of 8.03x is trading slightly below its industry peers’ ratio of 11.76x, which means if you buy Amica today, you’d be paying a reasonable price for it. And if you believe that Amica should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Amica’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Amica look like?
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 relatively muted revenue growth of 2.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Amica, at least in the short term.
What this means for you:
Are you a shareholder? AMC’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at AMC? Will you have enough conviction to buy should the price fluctuate below the the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on AMC, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Amica at this point in time. You'd be interested to know, that we found 1 warning sign for Amica and you'll want to know about it.
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This article by Simply Wall St is general in nature. 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.
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About WSE:AMC
Amica
Engages in the production and sale of household appliances in Poland and internationally.
Flawless balance sheet and undervalued.
