Is AB Sagax (publ) (STO:SAGA A) Potentially Undervalued?

While AB Sagax (publ) (STO:SAGA A) might not have the largest market cap around , it saw significant share price movement during recent months on the OM, rising to highs of kr240 and falling to the lows of kr201. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AB Sagax's current trading price of kr208 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AB Sagax’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What's The Opportunity In AB Sagax?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 21.24x is currently trading slightly above its industry peers’ ratio of 18.27x, which means if you buy AB Sagax today, you’d be paying a relatively sensible price for it. And if you believe that AB Sagax should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since AB Sagax’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.

See our latest analysis for AB Sagax

Can we expect growth from AB Sagax?

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. With profit expected to grow by 22% over the next couple of years, the future seems bright for AB Sagax. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SAGA A’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at SAGA A? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SAGA A, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SAGA A, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into AB Sagax, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for AB Sagax you should be mindful of and 1 of these shouldn't be ignored.

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

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

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.