Is Now The Time To Look At Buying Instalco AB (publ) (STO:INSTAL)?

Instalco AB (publ) (STO:INSTAL), might not be a large cap stock, but it saw significant share price movement during recent months on the OM, rising to highs of kr56.80 and falling to the lows of kr34.46. 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 Instalco's current trading price of kr34.46 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 Instalco’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Instalco

Is Instalco Still Cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Instalco’s ratio of 17.28x is above its peer average of 10.55x, which suggests the stock is trading at a higher price compared to the Construction industry. Furthermore, Instalco’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Instalco look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Instalco's earnings over the next few years are expected to increase by 44%, 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? It seems like the market has well and truly priced in INSTAL’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe INSTAL 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 INSTAL 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 optimistic prospect is encouraging for INSTAL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Instalco, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Instalco has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in Instalco, 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.