Sanderson Design Group plc (LON:SDG), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the AIM. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Sanderson Design Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Sanderson Design Group

What's The Opportunity In Sanderson Design Group?

Great news for investors – Sanderson Design Group is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £1.73, but it is currently trading at UK£1.13 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Sanderson Design Group’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.

What kind of growth will Sanderson Design Group generate?

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. However, with a negative profit growth of -2.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Sanderson Design Group. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although SDG is currently undervalued, 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 SDG, 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 tabs on SDG for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, 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 want to dive deeper into Sanderson Design Group, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Sanderson Design Group and you'll want to know about these.

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

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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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