The Alumasc Group plc (LON:ALU), might not be a large cap stock, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£1.84 and falling to the lows of UK£1.52. 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 Alumasc Group's current trading price of UK£1.59 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 Alumasc Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Alumasc Group Still Cheap?
Great news for investors – Alumasc Group is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £2.37, but it is currently trading at UK£1.59 on the share market, meaning that there is still an opportunity to buy now. Alumasc Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Alumasc Group?
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 a negative profit growth of -1.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Alumasc Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although ALU is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to ALU, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on ALU for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into Alumasc Group, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Alumasc Group has 2 warning signs and it would be unwise to ignore these.
If you are no longer interested in Alumasc Group, 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.
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