NP3 Fastigheter AB (publ) (STO:NP3), which is in the real estate business, and is based in Sweden, saw a double-digit share price rise of over 10% in the past couple of months on the OM. 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? Let’s examine NP3 Fastigheter’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for NP3 Fastigheter

What's the opportunity in NP3 Fastigheter?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 9.2x is currently trading slightly above its industry peers’ ratio of 7.66x, which means if you buy NP3 Fastigheter today, you’d be paying a relatively reasonable price for it. And if you believe NP3 Fastigheter should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like NP3 Fastigheter’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 NP3 Fastigheter?

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. However, with a relatively muted profit growth of 6.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for NP3 Fastigheter, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in NP3’s growth outlook, with shares trading around its fair value. 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 NP3? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on NP3, now may not be the most optimal time to buy, given it is trading around its fair value. 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on NP3 Fastigheter. You can find everything you need to know about NP3 Fastigheter in the latest infographic research report. If you are no longer interested in NP3 Fastigheter, 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.