At AU$0.076, is Spirit Technology Solutions Ltd (ASX:ST1) worth a close look?

Spirit Technology Solutions Ltd (ASX:ST1), may not be a large-cap stock, but it has seen significant share price movement over the past few months on the ASX, hitting highs of AU$0.21 and falling to lows of AU$0.076. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is whether Spirit Technology Solutions’ current trading price of AU$0.076 reflects the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of Spirit Technology Solutions based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Spirit Technology Solutions

What is Spirit Technology Solutions worth?

According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. I used the price/earnings ratio in this case because there is not enough visibility to predict its cash flow. The 77.55x equity ratio is currently trading in line with the ratio of its industry peers, which means that if you buy Spirit Technology Solutions today, you will pay a relatively reasonable price for it. So, is there another chance to buy low in the future? Since Spirit Technology Solutions’ stock is quite volatile (meaning its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us the opportunity to buy later. This is based on its high beta, which is a good indicator of stock price volatility.

What does the future of Spirit Technology Solutions look like?

ASX: ST1 earnings and revenue growth May 6, 2022

Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With profits expected to more than double over the next two years, the future looks bright for Spirit Technology Solutions. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.

What does this mean to you :

Are you a shareholder? ST1’s optimistic future growth appears to have been priced into the current share price, with stocks trading around industry price multiples. However, there are also other important factors that we haven’t considered today, such as the background of its management team. Have these factors changed since the last time you watched ST1? Will you be confident enough to invest in the company if the price drops below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ST1, now may not be the most optimal time to buy, given that it’s trading around industry price multiples. However, the optimistic forecast is encouraging for ST1, which means that it is worth looking further into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you want to do more analysis on the company, it is essential to be aware of the risks involved. You would be interested to know that we have found 2 warning signs for Spirit Technology Solutions and you will want to know more.

If you are no longer interested in Spirit Technology Solutions, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.