Is Adecoagro S.A. (NYSE:AGRO) Potentially Undervalued?
Adecoagro S.A. (NYSE:AGRO), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Adecoagro’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Adecoagro
What's The Opportunity In Adecoagro?
Great news for investors – Adecoagro is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.54x is currently well-below the industry average of 15.88x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Adecoagro’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.
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. 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. However, with a negative profit growth of -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Adecoagro. This certainty tips the risk-return scale towards higher risk.
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. I 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, I recommend you research further 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.
If you want to dive deeper into Adecoagro, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Adecoagro (including 2 which can't be ignored).
If you are no longer interested in Adecoagro, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
