When Should You Buy Topps Tiles Plc (LON:TPT)?
While Topps Tiles Plc (LON:TPT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£0.50 and falling to the lows of UK£0.38. 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 Topps Tiles' current trading price of UK£0.40 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 Topps Tiles’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 Topps Tiles
What Is Topps Tiles Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Topps Tiles’s ratio of 6.52x is trading in-line with its industry peers’ ratio, which means if you buy Topps Tiles today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because Topps Tiles’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Topps Tiles 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 a relatively muted revenue growth of 6.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Topps Tiles, at least in the short term.
What This Means For You
Are you a shareholder? TPT’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at TPT? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on TPT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 4 warning signs for Topps Tiles (1 is concerning) you should be familiar with.
If you are no longer interested in Topps Tiles, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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