AltaGas Ltd. (TSE:ALA), which is in the gas utilities business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$20.82 at one point, and dropping to the lows of CA$18.61. 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 AltaGas's current trading price of CA$20.01 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AltaGas’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for AltaGas
What is AltaGas worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.24x is currently trading slightly above its industry peers’ ratio of 18.06x, which means if you buy AltaGas today, you’d be paying a relatively reasonable price for it. And if you believe AltaGas should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since AltaGas’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of AltaGas 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 more than double in the upcoming, the future appears to be extremely bright for AltaGas. 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 ALA’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 track record of its management team. Have these factors changed since the last time you looked at ALA? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on ALA, 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 ALA, 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 AltaGas. You can find everything you need to know about AltaGas in the latest infographic research report. If you are no longer interested in AltaGas, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.
About TSX:ALA
Good value low.
