Arcontech Group Plc (LON:ARC), which is in the software business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to £1.61 at one point, and dropping to the lows of £1.13. 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 Arcontech Group’s current trading price of £1.15 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 Arcontech Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in Arcontech Group?
According to my valuation model, the stock is currently overvalued by about 21.58%, trading at UK£1.15 compared to my intrinsic value of £0.95. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Arcontech Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Arcontech Group look like?
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 Arcontech Group, it is expected to deliver a negative earnings growth of -1.7%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? If you believe ARC is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 tabs on ARC for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Arcontech Group. You can find everything you need to know about Arcontech Group in the latest infographic research report. If you are no longer interested in Arcontech Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.