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Aker ASA (OB:AKER), a diversified financial company based in Norway, saw a double-digit share price rise of over 10% in the past couple of months on the OB. With many analysts covering the mid-cap 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 Aker’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Aker
Is Aker still cheap?
According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Aker’s ratio of 80.91x is above its peer average of 14.45x, which suggests the stock is overvalued compared to the Diversified Financial industry. Another thing to keep in mind is that Aker’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Aker?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Aker’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This 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 well and truly priced in AKER’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AKER should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on AKER for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for AKER, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.