At zł15.70, Is Pkp Cargo S.A. (WSE:PKP) Worth Looking At Closely?

While Pkp Cargo S.A. (WSE:PKP) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the WSE over the last few months. 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 Pkp Cargo’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Pkp Cargo

Is Pkp Cargo Still Cheap?

Good news, investors! Pkp Cargo is still a bargain right now according to my price multiple model, which compares 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 2.34x is currently well-below the industry average of 12.48x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Pkp Cargo’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Pkp Cargo?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Pkp Cargo, at least in the near future.

What This Means For You

Are you a shareholder? Although PKP is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to PKP, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on PKP for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 2 warning signs for Pkp Cargo (1 is significant) you should be familiar with.

If you are no longer interested in Pkp Cargo, 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.