Prima Industrie SpA (BIT:PRI), which is in the machinery business, and is based in Italy, saw significant share price movement during recent months on the BIT, rising to highs of €19.2 and falling to the lows of €11.7. 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 Prima Industrie's current trading price of €11.7 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 Prima Industrie’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 Prima Industrie
What's the opportunity in Prima Industrie?
Good news, investors! Prima Industrie is still a bargain right now. 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 Prima Industrie’s ratio of 8.36x is below its peer average of 14.57x, which suggests the stock is undervalued compared to the Machinery industry. However, given that Prima Industrie’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Prima Industrie 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. 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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Prima Industrie, at least in the near future.
What this means for you:
Are you a shareholder? Although PRI is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to PRI, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on PRI for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.