Is It Time To Consider Buying Atrium Ljungberg AB (publ) (STO:ATRLJ B)?

While Atrium Ljungberg AB (publ) (STO:ATRLJ B) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the OM. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Atrium Ljungberg’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Atrium Ljungberg

What is Atrium Ljungberg worth?

According to my 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Atrium Ljungberg’s ratio of 2.6x is trading slightly below its industry peers’ ratio of 4.09x, which means if you buy Atrium Ljungberg today, you’d be paying a reasonable price for it. And if you believe Atrium Ljungberg should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Atrium Ljungberg’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Atrium Ljungberg look like?

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. Though in the case of Atrium Ljungberg, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Currently, ATRLJ B appears to be trading around industry price multiples, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ATRLJ B, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ATRLJ B for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 crystallize your views on ATRLJ B should the price fluctuate below the industry PE ratio.

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. For example, Atrium Ljungberg has 3 warning signs (and 2 which are potentially serious) we think you should know about.

If you are no longer interested in Atrium Ljungberg, 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.