Have Investors Priced In AGF Management Limited's (TSE:AGF.B) Growth?

By
Simply Wall St
Published
May 31, 2018
TSX:AGF.B
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AGF Management Limited (TSX:AGF.B), a capital markets company based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$7.23 at one point, and dropping to the lows of CA$6.14. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether AGF Management's current trading price of CA$6.67 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 AGF Management’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for AGF Management

Is AGF Management still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7% above my intrinsic value, which means if you buy AGF Management today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is CA$6.23, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because AGF Management’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 AGF Management generate?

TSX:AGF.B Future Profit May 31st 18
TSX:AGF.B Future Profit May 31st 18
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. However, with a negative profit growth of -12.81% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for AGF Management. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? AGF.B seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AGF.B for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on AGF.B should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AGF Management. You can find everything you need to know about AGF Management in the latest infographic research report. If you are no longer interested in AGF Management, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.

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