At kr22.94, Is Orrön Energy AB (publ) (STO:ORRON) Worth Looking At Closely?

Orrön Energy AB (publ) (STO:ORRON), 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. 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? Let’s take a look at Orrön Energy’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Our analysis indicates that ORRON is potentially undervalued!

What Is Orrön Energy Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Orrön Energy’s ratio of 27.02x is trading slightly above its industry peers’ ratio of 26.29x, which means if you buy Orrön Energy today, you’d be paying a relatively sensible price for it. And if you believe that Orrön Energy should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Orrön Energy’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Orrön Energy look like?

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. Orrön Energy's earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? ORRON’s optimistic future growth appears to have been factored into the current share price, 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 ORRON? 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 ORRON, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ORRON, 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.

If you want to dive deeper into Orrön Energy, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Orrön Energy (including 2 which don't sit too well with us).

If you are no longer interested in Orrön Energy, 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.