What Is Ainsworth Game Technology Limited's (ASX:AGI) Share Price Doing?

Ainsworth Game Technology Limited (ASX:AGI), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$0.94 and falling to the lows of AU$0.75. 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 Ainsworth Game Technology's current trading price of AU$0.75 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ainsworth Game Technology’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 Ainsworth Game Technology

What Is Ainsworth Game Technology Worth?

Ainsworth Game Technology appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Ainsworth Game Technology’s ratio of 46.2x is above its peer average of 21.45x, which suggests the stock is trading at a higher price compared to the Hospitality industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Ainsworth Game Technology’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 kind of growth will Ainsworth Game Technology 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. Ainsworth Game Technology's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 AGI’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AGI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 AGI for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for AGI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Ainsworth Game Technology at this point in time. At Simply Wall St, we found 1 warning sign for Ainsworth Game Technology and we think they deserve your attention.

If you are no longer interested in Ainsworth Game Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.