Should You Investigate Bapcor Limited (ASX:BAP) At AU$7.71?
Bapcor Limited (ASX:BAP), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the ASX over the last few months. As a 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? Let’s take a look at Bapcor’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Bapcor
Is Bapcor still cheap?
According to my valuation model, Bapcor seems to be fairly priced at around 19% below my intrinsic value, which means if you buy Bapcor today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$9.50, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Bapcor has a low beta, which suggests its share price is less volatile than the wider market.
What does the future of Bapcor look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 grow by 71% over the next couple of years, the future seems bright for Bapcor. It looks like higher cash flow 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 already priced in BAP’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 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 BAP, 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 1 warning sign with Bapcor, and understanding this should be part of your investment process.
If you are no longer interested in Bapcor, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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