Pivot Technology Solutions, Inc. (TSE:PTG), is not the largest company out there, but it received a lot of attention from a substantial price increase on the TSX over the last few months. Less-covered, small caps tend to present 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 Pivot Technology Solutions’s outlook and valuation to see if the opportunity still exists.
What is Pivot Technology Solutions worth?
Great news for investors – Pivot Technology Solutions 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Pivot Technology Solutions’s ratio of 2.1x is below its peer average of 30.84x, which indicates the stock is trading at a lower price compared to the IT industry. However, given that Pivot Technology Solutions’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Pivot Technology Solutions?
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. Though in the case of Pivot Technology Solutions, it is expected to deliver a negative revenue growth of -3.6% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although PTG is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to PTG, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on PTG for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you’d like to know more about Pivot Technology Solutions as a business, it’s important to be aware of any risks it’s facing. Case in point: We’ve spotted 4 warning signs for Pivot Technology Solutions you should be mindful of and 1 of these can’t be ignored.
If you are no longer interested in Pivot Technology Solutions, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. 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.