Why Auckland International Airport Limited (NZSE:AIA) Could Be Worth Watching

While Auckland International Airport Limited (NZSE:AIA) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NZSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Auckland International Airport’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Auckland International Airport

What's the opportunity in Auckland International Airport?

According to my valuation model, Auckland International Airport seems to be fairly priced at around 11.49% above my intrinsic value, which means if you buy Auckland International Airport today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth NZ$6.95, then there isn’t really any room for the share price grow beyond what it’s currently trading. 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.

Can we expect growth from Auckland International Airport?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Auckland International Airport, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

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 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 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. In addition to this, 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 gel your views on AIA should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Auckland International Airport at this point in time. 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.