Alfa Laval AB (publ) (STO:ALFA) saw a double-digit share price rise of over 10% in the past couple of months on the OM. With many analysts covering the large-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? Today I will analyse the most recent data on Alfa Laval’s outlook and valuation to see if the opportunity still exists.
What is Alfa Laval worth?
According to my valuation model, Alfa Laval seems to be fairly priced at around 14% below my intrinsic value, which means if you buy Alfa Laval today, you’d be paying a fair price for it. And if you believe the company’s true value is SEK243.17, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Alfa Laval’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Alfa Laval 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. 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. However, with a relatively muted profit growth of 9.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Alfa Laval, at least in the short term.
What this means for you:
Are you a shareholder? ALFA’s future growth appears to have been factored into the current share price, 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 tabs on ALFA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Alfa Laval has 1 warning sign we think you should be aware of.
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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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