What Does AdderaCare AB's (STO:ADDERA) Share Price Indicate?

By
Simply Wall St
Published
May 23, 2021
OM:ADDERA
Source: Shutterstock

AdderaCare AB (STO:ADDERA), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the OM. 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 AdderaCare’s outlook and valuation to see if the opportunity still exists.

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 14.67x is currently well-below the industry average of 36.64x, 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 does the future of AdderaCare look like?

earnings-and-revenue-growth
OM:ADDERA Earnings and Revenue Growth May 24th 2021

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. In AdderaCare's case, its revenues over the next few years are expected to grow by 37%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since ADDERA is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health 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 make a leap. Its buoyant 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 track record of its management team, in order to make a well-informed assessment.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for AdderaCare you should be mindful of and 1 of these doesn't sit too well with us.

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


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.