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Acadian Timber Corp. (TSE:ADN), is not the largest company out there, but it saw a decent share price growth of 14% on the TSX over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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 Acadian Timber’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Acadian Timber
What's The Opportunity In Acadian Timber?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 16.92% above our intrinsic value, which means if you buy Acadian Timber today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$15.13, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Acadian Timber’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Acadian Timber generate?
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 Acadian Timber, at least in the near future.
What This Means For You
Are you a shareholder? ADN 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 optimal 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.
Are you a potential investor? If you’ve been keeping tabs on ADN for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on ADN should the price fluctuate below its true value.