Archer Limited (OB:ARCHER), an energy company based in Bermuda, led the OB gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Archer’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Archer
What’s the opportunity in Archer?The stock is currently trading at ØRE10.54 on the share market, which means it is overvalued by 23% compared to my intrinsic value of NOK8.55. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Archer’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
What kind of growth will Archer generate?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 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 Archer, at least in the near future.
What this means for you:
Are you a shareholder? If you believe ARCHER is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. 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 an eye on ARCHER for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Archer. You can find everything you need to know about Archer in the latest infographic research report. If you are no longer interested in Archer, you can use our free platform to see my list of over 50 other stocks with a high growth potential.