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Adecoagro S.A. (NYSE:AGRO), is not the largest company out there, but it saw a significant share price rise of 27% in the past couple of months on the NYSE. The company is inching closer to its yearly highs following the recent share price climb. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Adecoagro’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Adecoagro
Is Adecoagro Still Cheap?
Great news for investors – Adecoagro is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to 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 Adecoagro’s ratio of 5.48x is below its peer average of 18.75x, which indicates the stock is trading at a lower price compared to the Food industry. Although, there may be another chance to buy again in the future. This is because Adecoagro’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Adecoagro 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 Adecoagro, it is expected to deliver a highly negative earnings growth in the next few years, 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? Although AGRO is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to AGRO, 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 AGRO for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.