What Does Nischer Properties AB (publ)'s (NGM:NIS) Share Price Indicate?

By
Simply Wall St
Published
May 10, 2022
NGM:NIS
Source: Shutterstock

Nischer Properties AB (publ) (NGM:NIS), is not the largest company out there, but it saw significant share price movement during recent months on the NGM, rising to highs of kr8.48 and falling to the lows of kr5.60. 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 Nischer Properties' current trading price of kr5.60 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 Nischer Properties’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 Nischer Properties

What's the opportunity in Nischer Properties?

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 Nischer Properties’s ratio of 2.22x is trading slightly below its industry peers’ ratio of 5.35x, which means if you buy Nischer Properties today, you’d be paying a reasonable price for it. And if you believe that Nischer Properties 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 Nischer Properties’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 does the future of Nischer Properties look like?

earnings-and-revenue-growth
NGM:NIS Earnings and Revenue Growth May 10th 2022

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Nischer Properties, at least in the near future.

What this means for you:

Are you a shareholder? NIS seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on NIS, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on NIS for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on NIS should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Nischer Properties at this point in time. Be aware that Nischer Properties is showing 6 warning signs in our investment analysis and 4 of those are a bit unpleasant...

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

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