At AU$0.70, Is Adacel Technologies Limited (ASX:ADA) Worth Looking At Closely?

Adacel Technologies Limited (ASX:ADA), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the ASX. 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 Adacel Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Adacel Technologies

What Is Adacel Technologies Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.31% above my intrinsic value, which means if you buy Adacel Technologies today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth A$0.69, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Adacel Technologies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Adacel Technologies 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. Adacel Technologies' revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth 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 ADA’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 the stock? 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 tabs on ADA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

If you want to dive deeper into Adacel Technologies, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Adacel Technologies and we think they deserve your attention.

If you are no longer interested in Adacel Technologies, 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.