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Is Alkemy S.p.A. (BIT:ALK) Potentially Undervalued?

Simply Wall St

Alkemy S.p.A. (BIT:ALK), which is in the professional services business, and is based in Italy, led the BIT gainers with a relatively large price hike in the past couple of weeks. Less-covered, small caps tend to present 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 Alkemy’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Alkemy

Is Alkemy still cheap?

Good news, investors! Alkemy is still a bargain right now. My valuation model shows that the intrinsic value for the stock is €7.01, but it is currently trading at €4.70 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Alkemy’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, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Alkemy generate?

BIT:ALK Past and Future Earnings May 3rd 2020

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. 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 Alkemy’s case, its revenues over the next few years are expected to grow by 31%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since ALK is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on ALK for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ALK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Alkemy. You can find everything you need to know about Alkemy in the latest infographic research report. If you are no longer interested in Alkemy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.