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XP Power Limited (LON:XPP), might not be a large cap stock, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on XP Power’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for XP Power
What Is XP Power Worth?
The stock is currently trading at UK£24.00 on the share market, which means it is overvalued by 39% compared to my intrinsic value of £17.30. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since XP Power’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will XP Power 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. With revenues expected to grow by 30% over the next couple of years, the future seems bright for XP Power. If the level of expenses is able to be maintained, 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? It seems like the market has well and truly priced in XPP’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe XPP should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on XPP for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for XPP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.