Auckland International Airport Limited (NZSE:AIA), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NZSE. As a mid-cap 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 Auckland International Airport’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Auckland International Airport?
According to my valuation model, Auckland International Airport seems to be fairly priced at around 5.00% 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$7.42, there’s only an insignificant downside when the price falls to its real value. What's more, Auckland International Airport’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Auckland International Airport 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 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 reduce the risk in your portfolio. Is your current exposure to the stock beneficial 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 an eye on AIA for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Auckland International Airport and we think they deserve your attention.
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.
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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