Yahoo Finance Is There Now An Opportunity In Enterprise Group, Inc. (TSE:E)?
Enterprise Group, Inc. (TSE:E), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the TSX over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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 Enterprise Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Enterprise Group
What's The Opportunity In Enterprise Group?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Enterprise Group’s ratio of 10.53x is trading slightly below its industry peers’ ratio of 10.53x, which means if you buy Enterprise Group today, you’d be paying a reasonable price for it. And if you believe Enterprise Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Enterprise Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Enterprise Group 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. 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. However, with a negative profit growth of -7.6% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Enterprise Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, E appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on E, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on E for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on E should the price fluctuate below the industry PE ratio.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Enterprise Group has 3 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Enterprise Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
