Is Now The Time To Look At Buying Cenkos Securities plc (LON:CNKS)?

Cenkos Securities plc (LON:CNKS), which is in the capital markets business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the AIM over the last few months. 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 examine Cenkos Securities’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Cenkos Securities

What is Cenkos Securities worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 15.42x is currently trading slightly above its industry peers’ ratio of 15.06x, which means if you buy Cenkos Securities today, you’d be paying a relatively sensible price for it. And if you believe Cenkos Securities should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Cenkos Securities’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Cenkos Securities 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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Cenkos Securities, at least in the near future.

What this means for you:

Are you a shareholder? Currently, CNKS appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CNKS, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CNKS for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on CNKS should the price fluctuate below the industry PE ratio.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cenkos Securities. You can find everything you need to know about Cenkos Securities in the latest infographic research report. If you are no longer interested in Cenkos Securities, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.