Aurinia Pharmaceuticals Inc (TSX:AUP), a biotechnology company based in Canada, received a lot of attention from a substantial price movement on the TSX in the over the last few months, increasing to CA$8.84 at one point, and dropping to the lows of CA$7.21. 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 AUP’s current trading price of CA$7.31 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 AUP’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 Aurinia Pharmaceuticals
Is AUP still cheap?
According to my relative valuation model, AUP seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that AUP’s ratio of 2.7x is trading slightly above its industry peers’ ratio of 2.4x, which means if you buy AUP today, you’d be paying a relatively reasonable price for it. And if you believe that AUP should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since AUP’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 AUP moves relative to the rest of the market.
Can we expect growth from AUP?
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 AUP future expectations. AUP’s earnings over the next few years are expected to increase by 78.59%, 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 AUP’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 AUP? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on AUP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for AUP, which means it’s worth further examining 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 Aurinia Pharmaceuticals. You can find everything you need to know about AUP in the latest infographic research report. If you are no longer interested in Aurinia Pharmaceuticals, 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.