Should You Investigate Avation PLC (LON:AVAP) At UK£1.10?

Avation PLC (LON:AVAP), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£1.27 and falling to the lows of UK£1.10. 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 Avation's current trading price of UK£1.10 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 Avation’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 Avation

What's The Opportunity In Avation?

Great news for investors – Avation 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 2.48x is currently well-below the industry average of 10.41x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Avation’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.

Can we expect growth from Avation?

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 Avation, it is expected to deliver a negative revenue growth of -3.1% 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 AVAP is currently trading below the industry PE ratio, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to AVAP, 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 AVAP for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, 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 while earnings quality is important, it's equally important to consider the risks facing Avation at this point in time. When we did our research, we found 4 warning signs for Avation (2 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Avation, 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.