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Solid State plc (LON:SOLI), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£15.30 at one point, and dropping to the lows of UK£13.55. 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 Solid State's current trading price of UK£14.00 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Solid State’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Solid State
What's The Opportunity In Solid State?
Great news for investors – Solid State is still trading at a fairly cheap price 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 Solid State’s ratio of 17.94x is below its peer average of 26.14x, which indicates the stock is trading at a lower price compared to the Electronic industry. What’s more interesting is that, Solid State’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Solid State?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Solid State, at least in the near future.
What This Means For You
Are you a shareholder? Although SOLI is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SOLI, or whether diversifying into another stock may be a better move for your total risk and return.