Is It Time To Consider Buying AdderaCare AB (STO:ADDERA)?

While AdderaCare AB (STO:ADDERA) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the OM. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine AdderaCare’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for AdderaCare

Is AdderaCare still cheap?

Great news for investors – AdderaCare is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.25x is currently well-below the industry average of 32.26x, meaning that it is trading at a cheaper price relative to its peers. However, given that AdderaCare’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will AdderaCare generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 revenue growth of 8.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for AdderaCare, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since ADDERA is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ADDERA for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ADDERA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, AdderaCare has 3 warning signs (and 2 which are potentially serious) we think you should know about.

If you are no longer interested in AdderaCare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you decide to trade AdderaCare, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.