Yahoo Finance Is Now An Opportune Moment To Examine Softcat plc (LON:SCT)?
While Softcat plc (LON:SCT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£13.06 and falling to the lows of UK£11.75. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Softcat's current trading price of UK£11.86 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Softcat’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Softcat
What's The Opportunity In Softcat?
Great news for investors – Softcat is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 21.37x is currently well-below the industry average of 28.26x, meaning that it is trading at a cheaper price relative to its peers. Softcat’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of Softcat 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. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Softcat. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since SCT is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on SCT for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SCT. 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 investment decision.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Softcat has 2 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Softcat, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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