Have Investors Priced In Austal Limited's (ASX:ASB) Growth?

Austal Limited (ASX:ASB), a aerospace & defense company based in Australia, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of A$1.74 to A$1.89. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Austal’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Austal

What's the opportunity in Austal?

According to my valuation model, Austal seems to be fairly priced at around 15% above my intrinsic value, which means if you buy Austal today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth A$1.55, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Austal’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Austal 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. With profit expected to grow by 43.51% over the next couple of years, the future seems bright for Austal. It looks like higher cash flows 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 ASB’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ASB, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect 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 Austal. You can find everything you need to know about Austal in the latest infographic research report. If you are no longer interested in Austal, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.