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Is There Now An Opportunity In SECOS Group Limited (ASX:SES)?

While SECOS Group Limited (ASX:SES) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the ASX. 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? Today I will analyse the most recent data on SECOS Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for SECOS Group

Is SECOS Group still cheap?

According to my valuation model, SECOS Group seems to be fairly priced at around 6.75% above my intrinsic value, which means if you buy SECOS Group today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is A$0.16, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that SECOS Group’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.

What kind of growth will SECOS Group generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 SECOS Group's case, its revenues over the next few years are expected to grow by 70%, 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? It seems like the market has already priced in SES’s positive outlook, 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on SES, 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.

If you'd like to know more about SECOS Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for SECOS Group you should know about.

If you are no longer interested in SECOS Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. 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.

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