Is Now The Time To Look At Buying Arcoma AB (STO:ARCOMA)?

Arcoma AB (STO:ARCOMA), is not the largest company out there, but it saw a significant share price rise of 68% in the past couple of months on the OM. The company is now trading at yearly-high levels following the recent surge in its share price. 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? Let’s take a look at Arcoma’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Arcoma

What's The Opportunity In Arcoma?

Arcoma appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 67.62x is currently well-above the industry average of 36.45x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Arcoma’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Arcoma?

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. 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. Arcoma's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 ARCOMA’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 ARCOMA 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 tabs on ARCOMA for some time, 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 positive outlook is encouraging for ARCOMA, 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 Arcoma, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Arcoma and you'll want to know about this.

If you are no longer interested in Arcoma, 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.