Atlas Financial Holdings Inc (NASDAQ:AFH), a insurance company based in United States, received a lot of attention from a substantial price movement on the NasdaqGM over the last few months, increasing to $11.95 at one point, and dropping to the lows of $9.55. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Atlas Financial Holdings’s current trading price of $9.55 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 Atlas Financial Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for Atlas Financial Holdings
Is Atlas Financial Holdings still cheap?According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Atlas Financial Holdings’s ratio of 1.25x is trading slightly above its industry peers’ ratio of 1.23x, which means if you buy Atlas Financial Holdings today, you’d be paying a relatively fair price for it. And if you believe Atlas Financial Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Atlas Financial Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What does the future of Atlas Financial Holdings 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. However, with an expected decline of -11.36% in revenues over the next year, short term growth isn’t a driver for a buy decision for Atlas Financial Holdings. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, AFH appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on AFH, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on AFH for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on AFH should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Atlas Financial Holdings. You can find everything you need to know about Atlas Financial Holdings in the latest infographic research report. If you are no longer interested in Atlas Financial Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.