In This Article:
Audinate Group Limited (ASX:AD8), might not be a large cap stock, but it saw a decent share price growth of 10% on the ASX over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Audinate Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Audinate Group
Is Audinate Group Still Cheap?
Audinate Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Audinate Group’s ratio of 74.42x is above its peer average of 34.8x, which suggests the stock is trading at a higher price compared to the Electronic industry. In addition to this, it seems like Audinate Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Audinate Group 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 a negative profit growth of -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Audinate Group. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? If you believe AD8 is currently trading above its peers, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.