Is Now The Time To Look At Buying Nolato AB (publ) (STO:NOLA B)?

Nolato AB (publ) (STO:NOLA B), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the OM over the last few months, increasing to kr62.85 at one point, and dropping to the lows of kr51.90. 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 Nolato's current trading price of kr55.65 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 Nolato’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Nolato

What's The Opportunity In Nolato?

Great news for investors – Nolato is still trading at a fairly cheap price according to my price multiple model, where I compare 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 14.5x is currently well-below the industry average of 24.83x, meaning that it is trading at a cheaper price relative to its peers. However, given that Nolato’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Nolato?

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 negative profit growth of -0.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Nolato. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although NOLA B is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to NOLA B, 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 an eye on NOLA B for a while, 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.

So while earnings quality is important, it's equally important to consider the risks facing Nolato at this point in time. For example, Nolato has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are no longer interested in Nolato, 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.