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While Infomedia Ltd (ASX:IFM) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.57 and falling to the lows of AU$1.25. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Infomedia's current trading price of AU$1.25 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Infomedia’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 Infomedia
Is Infomedia still cheap?
Infomedia is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 46.35x is currently well-above the industry average of 28.92x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Infomedia’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Infomedia generate?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Infomedia. 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 well and truly priced in IFM’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 IFM 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.