Is Advanced Oncotherapy plc (LON:AVO) Potentially Undervalued?

Advanced Oncotherapy plc (LON:AVO), 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 AIM. 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? Today I will analyse the most recent data on Advanced Oncotherapy’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Advanced Oncotherapy

Is Advanced Oncotherapy Still Cheap?

Advanced Oncotherapy appears to be overvalued by 23% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£0.25 on the market compared to my intrinsic value of £0.20. This means that the opportunity to buy Advanced Oncotherapy at a good price has disappeared! Another thing to keep in mind is that Advanced Oncotherapy’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Advanced Oncotherapy generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 81% over the next couple of years, the future seems bright for Advanced Oncotherapy. 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? AVO’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe AVO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on AVO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for AVO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Advanced Oncotherapy, you'd also look into what risks it is currently facing. To help with this, we've discovered 4 warning signs (2 are a bit concerning!) that you ought to be aware of before buying any shares in Advanced Oncotherapy.

If you are no longer interested in Advanced Oncotherapy, 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.