FSA Group Limited (ASX:FSA), a consumer finance company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. 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? Let’s take a look at FSA Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for FSA Group
What’s the opportunity in FSA Group?
According to my valuation model, the stock is currently overvalued by about 33%, trading at A$1.61 compared to my intrinsic value of A$1.21. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like FSA Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will FSA Group 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. With profit expected to grow by 21.14% over the next couple of years, the future seems bright for FSA Group. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? FSA Group’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FSA Group should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on FSA Group for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for FSA Group, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.