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Is Ardagh Group S.A. (NYSE:ARD) Potentially Undervalued?

Simply Wall St

Ardagh Group S.A. (NYSE:ARD), which is in the packaging business, and is based in Luxembourg, saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Ardagh Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Ardagh Group

What's the opportunity in Ardagh Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.1% below my intrinsic value, which means if you buy Ardagh Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth $18.66, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Ardagh Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Ardagh Group look like?

NYSE:ARD Past and Future Earnings, September 15th 2019

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 expected decline of -15% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ardagh Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? ARD seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial 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 ARD for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 gel your views on ARD should the price fluctuate below its true value.

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

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.

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. Thank you for reading.