A2A S.p.A. (BIT:A2A), is not the largest company out there, but it received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €1.95 at one point, and dropping to the lows of €1.66. 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 A2A's current trading price of €1.77 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at A2A’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for A2A
Is A2A still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.52% above my intrinsic value, which means if you buy A2A today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth €1.57, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because A2A’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will A2A 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. 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for A2A, at least in the near future.
What this means for you:
Are you a shareholder? A2A seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on A2A for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on A2A should the price fluctuate below its true value.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for A2A (of which 1 is potentially serious!) you should know about.
If you are no longer interested in A2A, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
About BIT:A2A
A2A
Engages in the production, sale, and distribution of gas and electricity, and district heating in Italy and internationally.
Undervalued with solid track record and pays a dividend.
