When Should You Buy AddLife AB (publ) (STO:ALIF B)?

AddLife AB (publ) (STO:ALIF B), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the OM. As a kr21b market cap stock, it seems odd AddLife is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at AddLife’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for AddLife

What is AddLife worth?

According to my valuation model, AddLife seems to be fairly priced at around 15% below my intrinsic value, which means if you buy AddLife today, you’d be paying a fair price for it. And if you believe the company’s true value is SEK204.87, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because AddLife’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.

Can we expect growth from AddLife?

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for AddLife, at least in the near future.

What this means for you:

Are you a shareholder? Currently, ALIF 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 de-risk 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 ALIF B for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears 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 ALIF B should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Be aware that AddLife is showing 4 warning signs in our investment analysis and 1 of those can't be ignored...

If you are no longer interested in AddLife, 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.