While Atlas Arteria Limited (ASX:ALX) might not be the most widely known stock at the moment, it led the ASX gainers with a relatively large price hike in the past couple of weeks. As a well-established company, which tends to be well-covered 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 Atlas Arteria’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Atlas Arteria still cheap?
Good news, investors! Atlas Arteria is still a bargain right now. My valuation model shows that the intrinsic value for the stock is A$10.90, but it is currently trading at AU$6.90 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Atlas Arteria’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, 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.
What does the future of Atlas Arteria look like?
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. 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. Atlas Arteria's 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? Since ALX is currently undervalued, 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 capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on ALX for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ALX. 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.
So while earnings quality is important, it's equally important to consider the risks facing Atlas Arteria at this point in time. For instance, we've identified 2 warning signs for Atlas Arteria (1 shouldn't be ignored) you should be familiar with.
If you are no longer interested in Atlas Arteria, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
If you’re looking to trade Atlas Arteria, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
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. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.