The Character Group plc (LON:CCT), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Character Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Character Group

Is Character Group Still Cheap?

Character Group appears to be overvalued by 27% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK￡2.85 on the market compared to my intrinsic value of ￡2.24. This means that the opportunity to buy Character Group at a good price has disappeared! Another thing to keep in mind is that Character Group’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Character Group 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. 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. With profit expected to grow by a double-digit 11% in the upcoming year, the short-term outlook is positive for Character Group. 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? It seems like the market has well and truly priced in CCT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CCT should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CCT for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CCT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.