Alfa, S.A.B. de C.V. (BMV:ALFAA), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BMV over the last few months, increasing to Mex$15.47 at one point, and dropping to the lows of Mex$13.28. 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 Alfa. de's current trading price of Mex$13.91 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 Alfa. de’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 Alfa. de
What's the opportunity in Alfa. de?
According to my valuation model, Alfa. de seems to be fairly priced at around 12% below my intrinsic value, which means if you buy Alfa. de today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth MX$15.74, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Alfa. de’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 does the future of Alfa. de look like?
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. However, with a relatively muted revenue growth of 4.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Alfa. de, at least in the short term.
What this means for you:
Are you a shareholder? ALFA A’s future growth appears to have been factored into the current share price, 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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on ALFA A, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
If you want to dive deeper into Alfa. de, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Alfa. de, and understanding these should be part of your investment process.
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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.
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About BMV:ALFA A
Alfa. de
Engages in the petrochemical and synthetic fiber and refrigerated food businesses in Mexico.
Very undervalued with moderate growth potential.
