Is Now An Opportune Moment To Examine Bufab AB (publ) (STO:BUFAB)?

Bufab AB (publ) (STO:BUFAB), might not be a large cap stock, but it led the OM gainers with a relatively large price hike in the past couple of weeks. The company is inching closer to its yearly highs following the recent share price climb. 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? Today we will analyse the most recent data on Bufab’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Bufab

What's The Opportunity In Bufab?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 25.08x is currently trading slightly below its industry peers’ ratio of 31.13x, which means if you buy Bufab today, you’d be paying a decent price for it. And if you believe that Bufab 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. Is there another opportunity to buy low in the future? Since Bufab’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Bufab?

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. Bufab's earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? BUFAB’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at BUFAB? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on BUFAB, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for BUFAB, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Bufab as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Bufab and you'll want to know about them.

If you are no longer interested in Bufab, 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.