Should You Investigate Adacel Technologies Limited (ASX:ADA) At AU$0.82?

Adacel Technologies Limited (ASX:ADA), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$0.95 and falling to the lows of AU$0.80. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Adacel Technologies' current trading price of AU$0.82 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 Adacel Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Adacel Technologies

What's The Opportunity In Adacel Technologies?

Great news for investors – Adacel Technologies is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.38x is currently well-below the industry average of 40.28x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Adacel Technologies’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Adacel Technologies look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 revenues expected to grow by a double-digit 27% over the next couple of years, the outlook is positive for Adacel Technologies. If the level of expenses is able to be maintained, 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? Since ADA is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ADA for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADA. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Adacel Technologies has 5 warning signs (and 3 which are potentially serious) we think you should know about.

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.