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Wagners Holding Company Limited (ASX:WGN), is not the largest company out there, but it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of AU$0.76 to AU$0.83. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Wagners Holding’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Wagners Holding
What's The Opportunity In Wagners Holding?
Wagners Holding appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Wagners Holding’s ratio of 20.16x is above its peer average of 11.2x, which suggests the stock is trading at a higher price compared to the Basic Materials industry. But, is there another opportunity to buy low in the future? Since Wagners Holding’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 kind of growth will Wagners Holding 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. Wagners Holding's earnings over the next few years are expected to increase by 94%, 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? It seems like the market has well and truly priced in WGN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe WGN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on WGN for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for WGN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.