When Should You Buy K-Fast Holding AB (publ) (STO:KFAST B)?

While K-Fast Holding AB (publ) (STO:KFAST B) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the OM over the last few months, increasing to kr31.20 at one point, and dropping to the lows of kr21.28. 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 K-Fast Holding's current trading price of kr21.28 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 K-Fast Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for K-Fast Holding

Is K-Fast Holding Still Cheap?

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 K-Fast Holding’s ratio of 5.05x is trading slightly below its industry peers’ ratio of 9.09x, which means if you buy K-Fast Holding today, you’d be paying a reasonable price for it. And if you believe that K-Fast Holding 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. Although, there may be an opportunity to buy in the future. This is because K-Fast Holding’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will K-Fast Holding generate?

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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for K-Fast Holding. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in KFAST B’s positive outlook, 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 KFAST 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 tabs on KFAST 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 KFAST 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for K-Fast Holding (1 is significant!) and we strongly recommend you look at them before investing.

If you are no longer interested in K-Fast Holding, 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.