GR Engineering Services Limited (ASX:GNG), a metals and mining company based in Australia, received a lot of attention from a substantial price movement on the ASX in the over the last few months, increasing to A$1.6 at one point, and dropping to the lows of A$1.32. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether GR Engineering Services’s current trading price of A$1.37 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 GR Engineering Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for GR Engineering Services
Is GR Engineering Services still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.80% below my intrinsic value, which means if you buy GR Engineering Services today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$1.55, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like GR Engineering Services’s share price is quite stable, which means 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 GR Engineering Services?
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. GR Engineering Services’s earnings over the next few years are expected to increase by 43.54%, 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? GNG’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?