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EL.En. S.p.A. (BIT:ELN), which is in the medical equipment business, and is based in Italy, saw a double-digit share price rise of over 10% in the past couple of months on the BIT. 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 examine EL.En’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for EL.En
What's the opportunity in EL.En?
Great news for investors – EL.En is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is €32.51, but it is currently trading at €17.44 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that EL.En’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of EL.En look like?
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. EL.En’s earnings over the next few years are expected to increase by 65%, 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? Since ELN is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ELN for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ELN. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.