Is It Too Late To Consider Buying Apollo Endosurgery, Inc. (NASDAQ:APEN)?

Apollo Endosurgery, Inc. (NASDAQ:APEN), is not the largest company out there, but it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. 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? Let’s examine Apollo Endosurgery’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Apollo Endosurgery

What is Apollo Endosurgery worth?

Apollo Endosurgery appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$4.88 on the market compared to my intrinsic value of $3.63. Not the best news for investors looking to buy! In addition to this, it seems like Apollo Endosurgery’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Apollo Endosurgery look like?

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 grow by 37% over the next couple of years, the future seems bright for Apollo Endosurgery. 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? APEN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe APEN 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. 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 an eye on APEN for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for APEN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Apollo Endosurgery at this point in time. At Simply Wall St, we found 3 warning signs for Apollo Endosurgery and we think they deserve your attention.

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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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