When Should You Buy Alcanna Inc. (TSE:CLIQ)?

By
Simply Wall St
Published
February 04, 2021
Source: Shutterstock

Alcanna Inc. (TSE:CLIQ), 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 TSX. 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 examine Alcanna’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Alcanna

What's the opportunity in Alcanna?

Good news, investors! Alcanna is still a bargain right now. According to my valuation, the intrinsic value for the stock is CA$9.10, but it is currently trading at CA$7.21 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Alcanna’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 kind of growth will Alcanna generate?

earnings-and-revenue-growth
TSX:CLIQ Earnings and Revenue Growth February 5th 2021

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. Though in the case of Alcanna, it is expected to deliver a negative revenue growth of -12% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although CLIQ is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to CLIQ, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on CLIQ for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Alcanna is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

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