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While Atlas Engineered Products Ltd. (CVE:AEP) might not have the largest market cap around , it led the TSXV gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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 examine Atlas Engineered Products’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Atlas Engineered Products
What's The Opportunity In Atlas Engineered Products?
According to our valuation model, Atlas Engineered Products seems to be fairly priced at around 9.9% below our intrinsic value, which means if you buy Atlas Engineered Products today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$1.31, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Atlas Engineered Products’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Atlas Engineered Products 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. In Atlas Engineered Products' case, its revenues over the next few years are expected to grow by 46%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in AEP’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?