Is Now The Time To Look At Buying Eagers Automotive Limited (ASX:APE)?

Eagers Automotive Limited (ASX:APE), is not the largest company out there, but it saw a significant share price rise of 62% in the past couple of months on the ASX. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Eagers Automotive’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What's The Opportunity In Eagers Automotive?

The stock is currently trading at AU$27.25 on the share market, which means it is overvalued by 24% compared to our intrinsic value of A$21.96. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Eagers Automotive’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

View our latest analysis for Eagers Automotive

Can we expect growth from Eagers Automotive?

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. With profit expected to grow by 73% over the next couple of years, the future seems bright for Eagers Automotive. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? APE’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe APE 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 APE 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 is encouraging for APE, 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 Eagers Automotive at this point in time. For instance, we've identified 3 warning signs for Eagers Automotive (1 shouldn't be ignored) you should be familiar with.

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.