Stock Analysis

Is Agora S.A. (WSE:AGO) Potentially Undervalued?

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Agora S.A. (WSE:AGO), might not be a large cap stock, but 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? Today I will analyse the most recent data on Agora’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Agora

What's the opportunity in Agora?

According to my valuation model, Agora seems to be fairly priced at around 8.6% below my intrinsic value, which means if you buy Agora today, you’d be paying a fair price for it. And if you believe the company’s true value is PLN7.48, then there’s not much of an upside to gain from mispricing. Furthermore, Agora’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Agora?

WSE:AGO Earnings and Revenue Growth February 1st 2021

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 the upcoming year, Agora's earnings are expected to increase by 32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AGO’s positive outlook, 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 an eye on AGO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

If you'd like to know more about Agora as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Agora you should know about.

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