Is Addnode Group AB (publ) (STO:ANOD B) Potentially Undervalued?

While Addnode Group AB (publ) (STO:ANOD B) might not be the most widely known stock at the moment, it led the OM gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, 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 examine Addnode Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Addnode Group

What Is Addnode Group Worth?

Addnode Group is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 Addnode Group’s ratio of 42.85x is above its peer average of 19.5x, which suggests the stock is trading at a higher price compared to the IT industry. But, is there another opportunity to buy low in the future? Since Addnode Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Can we expect growth from Addnode Group?

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. Addnode Group's earnings over the next few years are expected to increase by 44%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in ANOD B’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ANOD B should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ANOD B for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ANOD B, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Addnode Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Addnode Group and we think they deserve your attention.

If you are no longer interested in Addnode Group, 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.