Spectrum ASA (OB:SPU), an energy company based in Norway, saw a decent share price growth in the teens level on the OB over the last few months. 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? Let’s examine Spectrum’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Spectrum
Is Spectrum still cheap?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1% above my intrinsic value, which means if you buy Spectrum today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth NOK43.51, there’s only an insignificant downside when the price falls to its real value. Furthermore, it seems like Spectrum’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Spectrum 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. In Spectrum’s case, its revenues over the next few years are expected to grow by 76.82%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? SPU’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on SPU, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Spectrum. You can find everything you need to know about Spectrum in the latest infographic research report. If you are no longer interested in Spectrum, you can use our free platform to see my list of over 50 other stocks with a high growth potential.