Parrot SA (EPA:PARRO), a communications company based in France, saw a significant share price rise of over 20% in the past couple of months on the ENXTPA. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Parrot’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Parrot
Is Parrot still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.71x is currently trading slightly below its industry peers’ ratio of 1.82x, which means if you buy Parrot today, you’d be paying a relatively fair price for it. And if you believe that Parrot should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like Parrot’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Parrot?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 profit expected to grow by 75.90% over the next couple of years, the future seems bright for Parrot. It looks like higher cash flows is on the cards for the stock, which…
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