Aegion Corporation (NASDAQ:AEGN), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$17.53 and falling to the lows of US$13.71. 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 Aegion's current trading price of US$13.88 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 Aegion’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Aegion?
Aegion appears to be overvalued by 34% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$13.88 on the market compared to my intrinsic value of $10.38. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Aegion’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Aegion?
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 Aegion, it is expected to deliver a negative revenue growth of -0.3% over the next couple of 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? If you believe AEGN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 AEGN for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?
So while earnings quality is important, it's equally important to consider the risks facing Aegion at this point in time. You'd be interested to know, that we found 2 warning signs for Aegion and you'll want to know about these.
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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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