Why Aleafia Health Inc. (TSE:AH) Could Be Worth Watching

Aleafia Health Inc. (TSE:AH), is not the largest company out there, but it received a lot of attention from a substantial price increase on the TSX over the last few months. 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 examine Aleafia Health’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Aleafia Health

What Is Aleafia Health Worth?

Great news for investors – Aleafia Health is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is CA$0.11, but it is currently trading at CA$0.07 on the share market, meaning that there is still an opportunity to buy now. However, given that Aleafia Health’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Aleafia Health?

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. With profit expected to grow by 76% over the next couple of years, the future seems bright for Aleafia Health. 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 AH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 AH for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AH. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

So while earnings quality is important, it's equally important to consider the risks facing Aleafia Health at this point in time. When we did our research, we found 5 warning signs for Aleafia Health (1 doesn't sit too well with us!) that we believe deserve your full attention.

If you are no longer interested in Aleafia Health, 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.