hVIVO plc (LON:HVO), 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 AIM. 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? Today I will analyse the most recent data on hVIVO’s outlook and valuation to see if the opportunity still exists.
Is hVIVO Still Cheap?
According to my valuation model, hVIVO seems to be fairly priced at around 10% below my intrinsic value, which means if you buy hVIVO today, you’d be paying a fair price for it. And if you believe the company’s true value is £0.13, then there’s not much of an upside to gain from mispricing. What's more, hVIVO’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of hVIVO 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. In hVIVO's case, its revenues over the next few years are expected to grow by 64%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? HVO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on HVO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 hVIVO as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with hVIVO (including 1 which can't be ignored).
If you are no longer interested in hVIVO, 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.
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