What Is Ariana Resources plc's (LON:AAU) Share Price Doing?

Ariana Resources plc (AIM:AAU), a metals and mining company based in United Kingdom, received a lot of attention from a substantial price movement on the AIM in the over the last few months, increasing to £0.02 at one point, and dropping to the lows of £0.01. 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 Ariana Resources's current trading price of £0.01 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 Ariana Resources’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Ariana Resources

Is Ariana Resources still cheap?

Good news, investors! Ariana Resources is still a bargain right now. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 0.91x is currently well-below the industry average of 14.09x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Ariana Resources’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Ariana Resources generate?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -3.95% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ariana Resources. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although AAU is currently undervalued, 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 AAU, 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 AAU for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

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

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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.