At kr23.00, Is It Time To Put Enad Global 7 AB (publ) (STO:EG7) On Your Watch List?

While Enad Global 7 AB (publ) (STO:EG7) might not be the most widely known stock at the moment, it led the OM gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Enad Global 7’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Enad Global 7

What's The Opportunity In Enad Global 7?

Enad Global 7 is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 71.5x is currently well-above the industry average of 31.53x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Enad Global 7’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Enad Global 7 look like?

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. With profit expected to more than double over the next couple of years, the future seems bright for Enad Global 7. 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 well and truly priced in EG7’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 EG7 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 an eye on EG7 for a while, 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 optimistic prospect is encouraging for EG7, 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 Enad Global 7, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Enad Global 7 has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in Enad Global 7, 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.