At zł41.50, Is Atal S.A. (WSE:1AT) Worth Looking At Closely?

While Atal S.A. (WSE:1AT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the WSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Atal’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Atal

What is Atal worth?

According to my valuation model, Atal seems to be fairly priced at around 7.4% below my intrinsic value, which means if you buy Atal today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth PLN44.80, then there’s not much of an upside to gain from mispricing. What's more, Atal’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Atal look like?

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. 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 a negative profit growth of -9.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Atal. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? 1AT seems fairly priced right now, 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 an eye on 1AT for a while, now may not be the most optimal 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 gel your views on 1AT should the price fluctuate below its true value.

If you want to dive deeper into Atal, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Atal, and understanding it should be part of your investment process.

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This article by Simply Wall St is general in nature. 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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