AVJennings Limited (ASX:AVJ), a real estate company based in Australia, saw significant share price volatility over the past couple of months on the ASX, rising to the highs of A$0.80 and falling to the lows of A$0.69. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether AVJennings’s current trading price of A$0.72 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 AVJennings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for AVJennings
What is AVJennings worth?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that AVJennings’s ratio of 7.51x is trading slightly below its industry peers’ ratio of 12.11x, which means if you buy AVJennings today, you’d be paying a fair price for it. And if you believe that AVJennings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like AVJennings’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 does the future of AVJennings look like?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. AVJennings’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? It seems like the market has already priced in AVJ’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 track record of its management team. Have these factors changed since the last time you looked at AVJ? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on AVJ, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for AVJ, which means it’s worth diving deeper into 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 AVJennings. You can find everything you need to know about AVJennings in the latest infographic research report. If you are no longer interested in AVJennings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.