Is It Time To Consider Buying AB Volvo (publ) (STO:VOLV B)?

Today we're going to take a look at the well-established AB Volvo (publ) (STO:VOLV B). The company's stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of kr217 to kr233. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AB Volvo’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for AB Volvo

What Is AB Volvo Worth?

According to my valuation model, AB Volvo seems to be fairly priced at around 5.26% above my intrinsic value, which means if you buy AB Volvo today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is SEK214.52, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because AB Volvo’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will AB Volvo generate?

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 negative profit growth of -1.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for AB Volvo. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? VOLV B seems fairly priced right now, 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 tabs on VOLV B for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems 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 VOLV B should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing AB Volvo at this point in time. When we did our research, we found 3 warning signs for AB Volvo (2 shouldn't be ignored!) that we believe deserve your full attention.

If you are no longer interested in AB Volvo, 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.