Should You Investigate Orange Polska S.A. (WSE:OPL) At zł6.40?

Orange Polska S.A. (WSE:OPL), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the WSE over the last few months, increasing to zł8.42 at one point, and dropping to the lows of zł6.40. 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 Orange Polska's current trading price of zł6.40 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 Orange Polska’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Orange Polska

Is Orange Polska still cheap?

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. 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 4.78x is currently trading slightly below its industry peers’ ratio of 9.13x, which means if you buy Orange Polska today, you’d be paying a decent price for it. And if you believe Orange Polska 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, Orange Polska’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Orange Polska 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. Though in the case of Orange Polska, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, OPL 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 OPL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on OPL 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. 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 crystallize your views on OPL should the price fluctuate below the industry PE ratio.

If you want to dive deeper into Orange Polska, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Orange Polska, and understanding them should be part of your investment process.

If you are no longer interested in Orange Polska, 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.