Arena REIT (ASX:ARF), which is in the reits business, and is based in Australia, saw a significant share price rise of over 20% in the past couple of months on the ASX. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Arena REIT’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Arena REIT still cheap?
Good news, investors! Arena REIT is still a bargain right now. According to my valuation, the intrinsic value for the stock is A$4.00, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Arena REIT’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Arena REIT generate?
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. Though in the case of Arena REIT, it is expected to deliver a relatively unexciting earnings growth of 2.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since ARF is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ARF for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ARF. 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 investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Arena REIT. You can find everything you need to know about Arena REIT in the latest infographic research report. If you are no longer interested in Arena REIT, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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