When Should You Buy Alcadon Group AB (publ) (STO:ALCA)?

While Alcadon Group AB (publ) (STO:ALCA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the OM over the last few months, increasing to kr126 at one point, and dropping to the lows of kr67.60. 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 Alcadon Group's current trading price of kr67.60 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Alcadon Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Alcadon Group

Is Alcadon Group still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 28.17x is currently trading slightly above its industry peers’ ratio of 24.5x, which means if you buy Alcadon Group today, you’d be paying a relatively reasonable price for it. And if you believe that Alcadon Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Alcadon Group’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 Alcadon Group?

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. With profit expected to more than double over the next couple of years, the future seems bright for Alcadon Group. 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? ALCA’s optimistic future growth appears to have been factored into the current share price, 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 ALCA? 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 ALCA, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ALCA, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Alcadon Group.

If you are no longer interested in Alcadon 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.