Stock Analysis

Is Now An Opportune Moment To Examine Associated British Foods plc (LON:ABF)?

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LSE:ABF
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Today we're going to take a look at the well-established Associated British Foods plc (LON:ABF). The company's stock saw a decent share price growth in the teens level on the LSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Associated British Foods’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Associated British Foods

What is Associated British Foods worth?

According to my valuation model, Associated British Foods seems to be fairly priced at around 14% below my intrinsic value, which means if you buy Associated British Foods today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £27.40, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Associated British Foods’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Associated British Foods?

earnings-and-revenue-growth
LSE:ABF Earnings and Revenue Growth March 7th 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. With profit expected to more than double over the next couple of years, the future seems bright for Associated British Foods. 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? It seems like the market has already priced in ABF’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ABF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Associated British Foods has 2 warning signs we think you should be aware of.

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