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Is Now The Time To Look At Buying Focusrite plc (LON:TUNE)?

·3-min read

Focusrite plc (LON:TUNE), 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£13.35 at one point, and dropping to the lows of UK£8.45. 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 Focusrite's current trading price of UK£8.90 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 Focusrite’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Focusrite

What's the opportunity in Focusrite?

Good news, investors! Focusrite is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £11.59, but it is currently trading at UK£8.90 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that Focusrite’s share price may be quite stable relative to the rest of 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 kind of growth will Focusrite generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. Focusrite's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since TUNE is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on TUNE for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TUNE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Focusrite, and understanding this should be part of your investment process.

If you are no longer interested in Focusrite, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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