Santos Limited (ASX:STO), an energy company based in Australia, led the ASX gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Santos’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Santos
What is Santos worth?The stock is currently trading at AU$5.86 on the share market, which means it is overvalued by 31% compared to my intrinsic value of A$4.48. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Santos’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Santos?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted revenue growth of 5.80% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Santos, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in STO’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe STO 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 STO 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 means it’s worth diving deeper into other factors 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 Santos. You can find everything you need to know about Santos in the latest infographic research report. If you are no longer interested in Santos, you can use our free platform to see my list of over 50 other stocks with a high growth potential.