Why NP3 Fastigheter AB (publ) (STO:NP3) Could Be Worth Watching

NP3 Fastigheter AB (publ) (STO:NP3), is not the largest company out there, but it led the OM gainers with a relatively large price hike in the past couple of weeks. 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? Let’s take a look at NP3 Fastigheter’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for NP3 Fastigheter

What is NP3 Fastigheter worth?

According to my valuation model, NP3 Fastigheter seems to be fairly priced at around 18% below my intrinsic value, which means if you buy NP3 Fastigheter today, you’d be paying a fair price for it. And if you believe that the stock is really worth SEK175.78, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because NP3 Fastigheter’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 NP3 Fastigheter?

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 a negative profit growth of -0.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for NP3 Fastigheter. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, NP3 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 beneficial 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 an eye on NP3 for a while, now may not be the most advantageous 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 NP3 should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that NP3 Fastigheter has 4 warning signs (2 make us uncomfortable!) that deserve your attention before going any further with your analysis.

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This article by Simply Wall St is general in nature. 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.
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