Autosports Group Limited (ASX:ASG), which is in the specialty retail business, and is based in Australia, led the ASX gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, 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 Autosports Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Autosports Group still cheap?According to my relative valuation model, the stock seems to be currently fairly priced. 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 Autosports Group’s ratio of 12.24x is trading slightly below its industry peers’ ratio of 12.57x, which means if you buy Autosports Group today, you’d be paying a fair price for it. And if you believe that Autosports Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Autosports Group’s share price is quite stable, which means 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 kind of growth will Autosports Group 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. Autosports Group’s earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more 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 ASG’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 financial strength of the company. Have these factors changed since the last time you looked at ASG? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on ASG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for ASG, which means it’s worth further examining 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 Autosports Group. You can find everything you need to know about Autosports Group in the latest infographic research report. If you are no longer interested in Autosports Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.