Is It Too Late To Consider Buying French Connection Group PLC (LON:FCCN)?

French Connection Group PLC (LON:FCCN), which is in the specialty retail business, and is based in United Kingdom, saw significant share price movement during recent months on the LSE, rising to highs of UK£0.39 and falling to the lows of UK£0.14. 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 French Connection Group's current trading price of UK£0.14 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 French Connection Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for French Connection Group

What's the opportunity in French Connection Group?

According to my 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. 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 13.76x is currently trading slightly above its industry peers’ ratio of 11.66x, which means if you buy French Connection Group today, you’d be paying a relatively reasonable price for it. And if you believe that French Connection Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like French Connection Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will French Connection Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 an expected decline of -5.3% in revenues over the next year, short term growth isn’t a driver for a buy decision for French Connection Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, FCCN 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 de-risk 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 FCCN, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on FCCN for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 crystallize your views on FCCN should the price fluctuate below the industry PE ratio.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on French Connection Group. You can find everything you need to know about French Connection Group in the latest infographic research report. If you are no longer interested in French Connection Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.