Today we’re going to take a look at the well-established Agrium Inc (TSX:AGU). The company’s stock saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$145.89 and falling to the lows of CA$132.25. 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 Agrium’s current trading price of CA$144.58 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 Agrium’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Agrium
What’s the opportunity in Agrium?
According to my valuation model, the stock is currently overvalued by about 35%, trading at CA$144.58 compared to my intrinsic value of CA$107.06. This means that the opportunity to buy Agrium at a good price has disappeared! Furthermore, Agrium’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Agrium?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Agrium. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in Agrium’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Agrium 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. 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 tabs on Agrium for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for Agrium, which means it’s worth diving deeper into other factors 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 Agrium. You can find everything you need to know about Agrium in the latest infographic research report. If you are no longer interested in Agrium, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass 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.