When Should You Buy Bergs Timber AB (publ) (STO:BRG B)?

Bergs Timber AB (publ) (STO:BRG B), is not the largest company out there, but it saw a double-digit share price rise of over 10% 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 Bergs Timber’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Bergs Timber

Is Bergs Timber still cheap?

According to my valuation model, Bergs Timber seems to be fairly priced at around 18% below my intrinsic value, which means if you buy Bergs Timber today, you’d be paying a fair price for it. And if you believe that the stock is really worth SEK6.31, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Bergs Timber’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 kind of growth will Bergs Timber 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Bergs Timber, at least in the near future.

What this means for you:

Are you a shareholder? Currently, BRG B appears to be trading around its fair value, 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 BRG B for a while, now may not be the most optimal 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 BRG B should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Bergs Timber at this point in time. Be aware that Bergs Timber is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...

If you are no longer interested in Bergs Timber, 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.