In This Article:
While Eagers Automotive Limited (ASX:APE) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$15.42 and falling to the lows of AU$12.83. 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 Eagers Automotive's current trading price of AU$13.31 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Eagers Automotive’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 Eagers Automotive
What's the opportunity in Eagers Automotive?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.65% above my intrinsic value, which means if you buy Eagers Automotive today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$12.97, then there isn’t really any 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 Eagers Automotive’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.
Can we expect growth from Eagers Automotive?
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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Eagers Automotive, at least in the near future.
What this means for you:
Are you a shareholder? APE seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.