Is Instem plc (LON:INS) Potentially Undervalued?
Instem plc (LON:INS), which is in the healthcare services business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£4.00 at one point, and dropping to the lows of UK£3.50. 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 Instem's current trading price of UK£3.60 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 Instem’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Instem
What's the opportunity in Instem?
The stock is currently trading at UK£3.60 on the share market, which means it is overvalued by 41% compared to my intrinsic value of £2.56. This means that the opportunity to buy Instem at a good price has disappeared! In addition to this, it seems like Instem’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Instem?
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. Instem’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in INS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe INS should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 INS for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for INS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Instem. You can find everything you need to know about Instem in the latest infographic research report. If you are no longer interested in Instem, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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. Thank you for reading.
