Stock Analysis

At US$7.69, Is Adecoagro S.A. (NYSE:AGRO) Worth Looking At Closely?

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While Adecoagro S.A. (NYSE:AGRO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$8.77 at one point, and dropping to the lows of US$7.19. 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 Adecoagro's current trading price of US$7.69 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 Adecoagro’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Adecoagro

What Is Adecoagro Worth?

Great news for investors – Adecoagro is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Adecoagro’s ratio of 7.69x is below its peer average of 16.43x, which indicates the stock is trading at a lower price compared to the Food industry. Although, there may be another chance to buy again in the future. This is because Adecoagro’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 Adecoagro?

NYSE:AGRO Earnings and Revenue Growth March 14th 2023

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 Adecoagro, it is expected to deliver a relatively unexciting earnings growth of 5.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since AGRO is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AGRO for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AGRO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Adecoagro at this point in time. Case in point: We've spotted 4 warning signs for Adecoagro you should be mindful of and 1 of these makes us a bit uncomfortable.

If you are no longer interested in Adecoagro, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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