Yahoo Finance At CA$0.82, Is It Time To Put East Side Games Group Inc. (TSE:EAGR) On Your Watch List?
East Side Games Group Inc. (TSE:EAGR), might not be a large cap stock, but it saw a significant share price rise of 58% in the past couple of months on the TSX. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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 take a look at East Side Games Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for East Side Games Group
Is East Side Games Group Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that East Side Games Group’s ratio of 21.66x is trading slightly above its industry peers’ ratio of 19.71x, which means if you buy East Side Games Group today, you’d be paying a relatively reasonable price for it. And if you believe East Side Games Group 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. Although, there may be an opportunity to buy in the future. This is because East Side Games Group’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 East Side Games Group generate?
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. In the upcoming year, East Side Games Group's earnings are expected to increase by 81%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in EAGR’s positive outlook, 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 EAGR? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on EAGR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EAGR, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about East Side Games Group as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for East Side Games Group and we think they deserve your attention.
If you are no longer interested in East Side Games Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
