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While Eleco Plc (LON:ELCO) might not have the largest market cap around , it saw a significant share price rise of 36% in the past couple of months on the AIM. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. Less-covered, small caps tend to present 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 Eleco’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Eleco
What's The Opportunity In Eleco?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 3.59% above our intrinsic value, which means if you buy Eleco today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is £1.27, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Eleco has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Eleco look like?
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. With profit expected to grow by 88% over the next couple of years, the future seems bright for Eleco. 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? ELCO’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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ELCO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.