Is It Time To Consider Buying Water Intelligence plc (LON:WATR)?

Water Intelligence plc (LON:WATR), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£9.25 and falling to the lows of UK£6.90. 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 Water Intelligence's current trading price of UK£7.10 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 Water Intelligence’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 Water Intelligence

Is Water Intelligence still cheap?

According to my valuation model, Water Intelligence seems to be fairly priced at around 18% below my intrinsic value, which means if you buy Water Intelligence today, you’d be paying a fair price for it. And if you believe the company’s true value is £8.67, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Water Intelligence’s low beta implies that the stock is less volatile than the wider market.

What does the future of Water Intelligence look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Water Intelligence's earnings over the next few years are expected to increase by 38%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? WATR’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on WATR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Water Intelligence at this point in time. At Simply Wall St, we found 2 warning signs for Water Intelligence and we think they deserve your attention.

If you are no longer interested in Water Intelligence, 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.