When Should You Buy Avanti Feeds Limited (NSE:AVANTIFEED)?

Avanti Feeds Limited (NSE:AVANTIFEED), 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 NSEI. 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 Avanti Feeds’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Avanti Feeds

What is Avanti Feeds worth?

According to my valuation model, Avanti Feeds seems to be fairly priced at around 3.8% below my intrinsic value, which means if you buy Avanti Feeds today, you’d be paying a reasonable price for it. And if you believe the company’s true value is ₹549.90, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Avanti Feeds’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Avanti Feeds?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Avanti Feeds' earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AVANTIFEED’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on AVANTIFEED, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Avanti Feeds, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Avanti Feeds, and understanding this should be part of your investment process.

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This article by Simply Wall St is general in nature. 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.
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