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

NP3 Fastigheter AB (publ) (STO:NP3), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the OM over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on NP3 Fastigheter’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for NP3 Fastigheter

What's the opportunity in NP3 Fastigheter?

According to my valuation model, NP3 Fastigheter seems to be fairly priced at around 14% below my intrinsic value, which means if you buy NP3 Fastigheter today, you’d be paying a reasonable price for it. And if you believe the company’s true value is SEK214.11, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that NP3 Fastigheter’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from NP3 Fastigheter?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 NP3 Fastigheter, 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? NP3 seems fairly priced right now, 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 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.

So while earnings quality is important, it's equally important to consider the risks facing NP3 Fastigheter at this point in time. Our analysis shows 4 warning signs for NP3 Fastigheter (2 are concerning!) and we strongly recommend you look at these before investing.

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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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