Acacia Research Corporation (NASDAQ:ACTG), a professional services company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on ACTG’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Acacia Research
What’s the opportunity in ACTG?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10% above my intrinsic value, which means if you buy ACTG today, you’d be paying a relatively reasonable price for it. And if you believe that ACTG is really worth $3.71, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because ACTG’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, ACTG’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will ACTG 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. In the upcoming year, ACTG’s earnings are expected to increase by 29.72%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ACTG’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at ACTG? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on ACTG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for ACTG, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Acacia Research. You can find everything you need to know about ACTG in the latest infographic research report. If you are no longer interested in Acacia Research, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.