While Universal Store Holdings Limited (ASX:UNI) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$9.30 at one point, and dropping to the lows of AU$6.86. 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 Universal Store Holdings' current trading price of AU$7.34 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 Universal Store Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our free stock report includes 2 warning signs investors should be aware of before investing in Universal Store Holdings. Read for free now.

Is Universal Store Holdings Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Universal Store Holdings’s ratio of 22.63x is trading slightly above its industry peers’ ratio of 19.6x, which means if you buy Universal Store Holdings today, you’d be paying a relatively sensible price for it. And if you believe Universal Store Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Universal Store Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Check out our latest analysis for Universal Store Holdings

What does the future of Universal Store Holdings 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. With profit expected to grow by 89% over the next couple of years, the future seems bright for Universal Store Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in UNI’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at UNI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on UNI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for UNI, 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 Universal Store Holdings at this point in time. For example - Universal Store Holdings has 2 warning signs we think you should be aware of.

If you are no longer interested in Universal Store Holdings, 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.