When Should You Buy ABB Ltd (VTX:ABBN)?
Let’s talk about the popular ABB Ltd (VTX:ABBN). The company’s shares received a lot of attention from a substantial price movement on the SWX over the last few months, increasing to CHF23.38 at one point, and dropping to the lows of CHF21.17. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether ABB’s current trading price of CHF23.19 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ABB’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for ABB
What’s the opportunity in ABB?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.6% below my intrinsic value, which means if you buy ABB today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth CHF23.57, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like ABB’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of ABB look like?
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. ABB’s earnings over the next few years are expected to increase by 56.8%, 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 ABBN’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on ABBN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into 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 ABB. You can find everything you need to know about ABB in the latest infographic research report. If you are no longer interested in ABB, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
