Is Now An Opportune Moment To Examine Fastighets AB Trianon (publ) (STO:TRIAN B)?

Fastighets AB Trianon (publ) (STO:TRIAN B), is not the largest company out there, but it received a lot of attention from a substantial price increase on the OM over the last few months. 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 Fastighets AB Trianon’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Fastighets AB Trianon

What is Fastighets AB Trianon worth?

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 Fastighets AB Trianon’s ratio of 3.47x is trading slightly below its industry peers’ ratio of 4.19x, which means if you buy Fastighets AB Trianon today, you’d be paying a decent price for it. And if you believe that Fastighets AB Trianon 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 Fastighets AB Trianon’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 Fastighets AB Trianon 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. 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 Fastighets AB Trianon, at least in the near future.

What this means for you:

Are you a shareholder? Currently, TRIAN B appears to be trading around industry price multiples, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on TRIAN B, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on TRIAN B for a while, now may not be the most advantageous 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 gel your views on TRIAN B should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 6 warning signs for Fastighets AB Trianon (2 are concerning!) that we believe deserve your full attention.

If you are no longer interested in Fastighets AB Trianon, 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.