Is It Time To Consider Buying Paxman AB (publ) (STO:PAX)?

Paxman AB (publ) (STO:PAX), might not be a large cap stock, but it saw a significant share price rise of 27% in the past couple of months on the OM. The company's trading levels have reached its high for the past year, following the recent bounce in the 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 examine Paxman’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Paxman

What's The Opportunity In Paxman?

According to our valuation model, Paxman seems to be fairly priced at around 15% below our intrinsic value, which means if you buy Paxman today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth SEK74.13, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Paxman’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Paxman generate?

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. Paxman'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 already priced in PAX’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on PAX, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

It can be quite valuable to consider what analysts expect for Paxman from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

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

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

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.