While Alcadon Group AB (publ) (STO:ALCA) might not be the most widely known stock at the moment, it led the OM gainers with a relatively large price hike in the past couple of weeks. 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? Let’s examine Alcadon Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Alcadon Group still cheap?
According to my valuation model, the stock is currently overvalued by about 36%, trading at kr28.40 compared to my intrinsic value of SEK20.90. Not the best news for investors looking to buy! Another thing to keep in mind is that Alcadon Group’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Alcadon 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. Alcadon Group’s earnings over the next few years are expected to increase by 63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in ALCA’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ALCA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ALCA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for ALCA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. For example, we’ve discovered 3 warning signs that you should run your eye over to get a better picture of Alcadon Group.
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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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