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Oxford Metrics plc (LON:OMG), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£1.19 and falling to the lows of UK£0.96. 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 Oxford Metrics' current trading price of UK£0.98 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 Oxford Metrics’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Oxford Metrics
Is Oxford Metrics still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 42.53x is currently trading slightly above its industry peers’ ratio of 39.76x, which means if you buy Oxford Metrics today, you’d be paying a relatively reasonable price for it. And if you believe that Oxford Metrics should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Oxford Metrics’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Oxford Metrics?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In Oxford Metrics' case, its revenues over the next few years are expected to grow by 43%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? OMG’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at OMG? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?