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Avation PLC (LON:AVAP), might not be a large cap stock, but it saw a decent share price growth in the teens level on the LSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Avation’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Avation
Is Avation Still Cheap?
According to my valuation model, the stock is currently overvalued by about 30%, trading at UK£0.70 compared to my intrinsic value of £0.54. This means that the opportunity to buy Avation at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Avation’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Avation?
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. With revenues expected to grow by 47% over the next year, the future seems bright for Avation. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock in the upcoming year, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in AVAP’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 AVAP 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 an eye on AVAP for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for AVAP, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.