Trifast plc (LON:TRI), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the LSE. As a small cap stock, which tends to lack high analyst coverage, 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 Trifast’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Trifast worth?
Great news for investors – Trifast is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £1.89, but it is currently trading at UK£1.18 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Trifast’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.
Can we expect growth from Trifast?
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. 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. Though in the case of Trifast, it is expected to deliver a relatively unexciting top-line growth of 3.4% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since TRI is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on TRI for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TRI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 2 warning signs for Trifast (1 is significant) you should be familiar with.
If you are no longer interested in Trifast, 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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