Is Now An Opportune Moment To Examine Advantage Solutions Inc. (NASDAQ:ADV)?

Advantage Solutions Inc. (NASDAQ:ADV), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$7.87 and falling to the lows of US$4.30. 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 Advantage Solutions' current trading price of US$4.30 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 Advantage Solutions’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Advantage Solutions

Is Advantage Solutions still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.61x is currently trading slightly above its industry peers’ ratio of 16.27x, which means if you buy Advantage Solutions today, you’d be paying a relatively reasonable price for it. And if you believe that Advantage Solutions should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Advantage Solutions’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Advantage 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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Advantage Solutions. 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? It seems like the market has already priced in ADV’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at ADV? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ADV, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ADV, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Advantage Solutions, you'd also look into what risks it is currently facing. To help with this, we've discovered 4 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Advantage Solutions.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.