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AeroVironment, Inc. (NASDAQ:AVAV), which is in the aerospace & defense business, and is based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $83.95 and falling to the lows of $66.89. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AeroVironment's current trading price of $68.63 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AeroVironment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is AeroVironment worth?
The stock is currently trading at US$68.63 on the share market, which means it is overvalued by 38.91% compared to my intrinsic value of $49.41. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since AeroVironment’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
Can we expect growth from AeroVironment?
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. Though in the case of AeroVironment, it is expected to deliver a negative earnings growth of -7.5%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? If you believe AVAV should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on AVAV for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AeroVironment. You can find everything you need to know about AeroVironment in the latest infographic research report. If you are no longer interested in AeroVironment, 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 firstname.lastname@example.org. 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.