Is It Time To Consider Buying Australian Vintage Ltd (ASX:AVG)?

Australian Vintage Ltd (ASX:AVG), is not the largest company out there, but it led the ASX 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 take a look at Australian Vintage’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Australian Vintage

Is Australian Vintage still cheap?

Great news for investors – Australian Vintage is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Australian Vintage’s ratio of 11.37x is below its peer average of 49.68x, which indicates the stock is trading at a lower price compared to the Beverage industry. However, given that Australian Vintage’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.

What kind of growth will Australian Vintage generate?

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. Australian Vintage's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since AVG is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AVG for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AVG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you want to dive deeper into Australian Vintage, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Australian Vintage and you'll want to know about this.

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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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