Avingtrans plc (LON:AVG), which is in the machinery business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the AIM over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Avingtrans’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Avingtrans?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.22% above my intrinsic value, which means if you buy Avingtrans today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is £3.05, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Avingtrans’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Avingtrans?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Avingtrans. 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 AVG’s positive outlook, with shares trading around its fair value. 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 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 AVG, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Avingtrans. You can find everything you need to know about Avingtrans in the latest infographic research report. If you are no longer interested in Avingtrans, 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 firstname.lastname@example.org. 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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