What Does Cloetta AB (publ)'s (STO:CLA B) Share Price Indicate?

Cloetta AB (publ) (STO:CLA B), might not be a large cap stock, but it saw its share price hover around a small range of kr23.20 to kr25.24 over the last few weeks. But is this actually reflective of the share value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cloetta’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 Cloetta

What is Cloetta worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Cloetta’s ratio of 25.54x is trading slightly below its industry peers’ ratio of 27.91x, which means if you buy Cloetta today, you’d be paying a decent price for it. And if you believe Cloetta 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, it seems like Cloetta’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Cloetta?

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. Cloetta's earnings over the next few years are expected to increase by 95%, 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? CLA B’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 financial strength of the company. Have these factors changed since the last time you looked at CLA B? 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 CLA B, 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 CLA B, 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.

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. You'd be interested to know, that we found 4 warning signs for Cloetta and you'll want to know about these.

If you are no longer interested in Cloetta, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

When trading Cloetta or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.