Is the Ei Group share price still cheap?

After years of neglect, the Ei Group share price finally kicked into life in late 2016 and have since gone on to more than double over the past few years. The group has built an enviable track record of year-on-year sales and earnings growth and has managed to both buy back shares and reduce net debt in tandem. So, with growing sales and earnings, and an improving financial condition, are Ei Group's shares still cheap despite their recent gains?

One quick way to gauge how expensive these shares are is to use Stockopedia’s Value Rank, which comprises the following simple valuation ratios:

• Price to Book Value
• Price to Earnings
• Price to Free Cash Flow
• Dividend Yield %
• Price to Sales
• Earnings Yield %

How does Ei stack up?

Ei Group's Value Rank

We can see by using Ei’s StockReport that the group has a:

• Rolling price to book value of 0.60,
• Rolling price to earnings ratio of 9.82
• Trailing twelve-month price to free cash flow of 3.29
• Rolling dividend yield of 0.000%
• Trailing twelve-month price to sales ratio of 1.25

When we add all of these together, we find that Ei has a Value Rank of 91. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.

Ei’s Value Rank of 91 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.

What does this mean for potential investors?

Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Ei that you can find out about here.