Why RugVista Group AB (publ) (STO:RUG) Could Be Worth Watching

While RugVista Group AB (publ) (STO:RUG) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the OM. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps sees 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? Today we will analyse the most recent data on RugVista Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for RugVista Group

Is RugVista Group Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that RugVista Group’s ratio of 16.88x is trading slightly below its industry peers’ ratio of 17.5x, which means if you buy RugVista Group today, you’d be paying a reasonable price for it. And if you believe RugVista Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because RugVista Group’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.

Can we expect growth from RugVista Group?

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. With profit expected to grow by 55% over the next couple of years, the future seems bright for RugVista Group. 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 already priced in RUG’s positive outlook, with shares trading around industry price multiples. 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 RUG? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on RUG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for RUG, 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.

So while earnings quality is important, it's equally important to consider the risks facing RugVista Group at this point in time. In terms of investment risks, we've identified 2 warning signs with RugVista Group, and understanding these should be part of your investment process.

If you are no longer interested in RugVista Group, 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.