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Qt Group Oyj (HLSE:QTCOM), a software company based in Finland, led the HLSE 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? Let’s take a look at Qt Group Oyj’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Qt Group Oyj
What’s the opportunity in Qt Group Oyj?
According to my valuation model, Qt Group Oyj seems to be fairly priced at around 4% above my intrinsic value, which means if you buy Qt Group Oyj today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €6.43, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Qt Group Oyj’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Qt Group Oyj?
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. Though in the case of Qt Group Oyj, it is expected to deliver a negative earnings growth of -7.54%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, QTCOM appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on QTCOM for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 QTCOM should the price fluctuate below its true value.