By Yahoo Finance, Published December 4, 2024
Is There Now An Opportunity In Santova Limited (JSE:SNV)?
Santova Limited (JSE:SNV), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the JSE. 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, 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 Santova’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What’s The Opportunity In Santova?
According to our 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 justified. We’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 7.39x is currently trading slightly above its industry peers’ ratio of 7.39x, which means if you buy Santova today, you’d be paying a relatively sensible price for it. And if you believe that Santova should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Santova’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.
Can we expect growth from Santova?
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. In the upcoming year, Santova’s earnings are expected to increase by 45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
