At AU$2.74, Is It Time To Put Pacific Smiles Group Limited (ASX:PSQ) On Your Watch List?
Pacific Smiles Group Limited (ASX:PSQ), is not the largest company out there, but it saw a decent share price growth in the teens level on the ASX over the last few months. Less-covered, small caps sees 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 Pacific Smiles Group’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Pacific Smiles Group
What is Pacific Smiles Group worth?
Pacific Smiles Group is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Pacific Smiles Group’s ratio of 34.63x is above its peer average of 21.03x, which suggests the stock is trading at a higher price compared to the Healthcare industry. But, is there another opportunity to buy low in the future? Given that Pacific Smiles 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Pacific Smiles 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. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Pacific Smiles Group. 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 PSQ’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe PSQ should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 PSQ for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for PSQ, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Pacific Smiles Group as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Pacific Smiles Group.
If you are no longer interested in Pacific Smiles 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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