Is Auckland International Airport Limited (NZSE:AIA) Potentially Undervalued?

While Auckland International Airport Limited (NZSE:AIA) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NZSE, rising to highs of NZ$8.30 and falling to the lows of NZ$7.20. 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 Auckland International Airport's current trading price of NZ$7.42 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 Auckland International Airport’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Auckland International Airport

What's the opportunity in Auckland International Airport?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.66% above my intrinsic value, which means if you buy Auckland International Airport today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is NZ$7.02, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Auckland International Airport has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Auckland International Airport?

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 Auckland International Airport, at least in the near future.

What this means for you:

Are you a shareholder? Currently, AIA appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 AIA for a while, now may not be the most optimal 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. Furthermore, 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 crystalize your views on AIA 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. For example - Auckland International Airport has 1 warning sign we think you should be aware of.

If you are no longer interested in Auckland International Airport, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.