Is Eagers Automotive Limited (ASX:APE) Potentially Undervalued?

While Eagers Automotive Limited (ASX:APE) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the ASX over the last few months. As a 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? Let’s examine Eagers Automotive’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Eagers Automotive

What Is Eagers Automotive Worth?

Good news, investors! Eagers Automotive is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$16.13, but it is currently trading at AU$11.57 on the share market, meaning that there is still an opportunity to buy now. However, given that Eagers Automotive’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 does the future of Eagers Automotive look like?

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. Though in the case of Eagers Automotive, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although APE is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to APE, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on APE for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Eagers Automotive has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Eagers Automotive, 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.