ADDvise Group AB (publ) (STO:ADDV A), 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 OM. As a small cap stock, hardly covered by any analysts, 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? Today I will analyse the most recent data on ADDvise Group’s outlook and valuation to see if the opportunity still exists.
What’s the opportunity in ADDvise Group?
Good news, investors! ADDvise Group is still a bargain right now according to my price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that ADDvise Group’s ratio of 29.79x is below its peer average of 42x, which indicates the stock is trading at a lower price compared to the Medical Equipment industry. ADDvise Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will ADDvise 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. With profit expected to grow by 84% over the next couple of years, the future seems bright for ADDvise Group. 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? Since ADDV A is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 price multiple.
Are you a potential investor? If you’ve been keeping an eye on ADDV A for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADDV A. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.
So if you’d like to dive deeper into this stock, it’s crucial to consider any risks it’s facing. To that end, you should learn about the 4 warning signs we’ve spotted with ADDvise Group (including 1 which can’t be ignored).
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This article by Simply Wall St is general in nature. 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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