AgroFresh Solutions, Inc. (NASDAQ:AGFS), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at AgroFresh Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in AgroFresh Solutions?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.79% above my intrinsic value, which means if you buy AgroFresh Solutions today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $1.93, there’s only an insignificant downside when the price falls to its real value. In addition to this, AgroFresh Solutions has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from AgroFresh Solutions?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. AgroFresh Solutions' earnings over the next few years are expected to increase by 60%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? AGFS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on AGFS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that AgroFresh Solutions has 2 warning signs and it would be unwise to ignore them.
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What are the risks and opportunities for AgroFresh Solutions?
Trading at 5.4% below our estimate of its fair value
Revenue is forecast to grow 9.9% per year
Currently unprofitable and not forecast to become profitable over the next 3 years
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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