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Ag Growth International Inc. (TSE:AFN), which is in the machinery business, and is based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$61.93 at one point, and dropping to the lows of CA$52.28. 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 Ag Growth International's current trading price of CA$53.41 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 Ag Growth International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Ag Growth International?
According to my valuation model, Ag Growth International seems to be fairly priced at around 12% below my intrinsic value, which means if you buy Ag Growth International today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$60.73, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Ag Growth International’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Ag Growth International?
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. With profit expected to grow by 94% over the next couple of years, the future seems bright for Ag Growth International. 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 AFN’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 tabs on AFN, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 Ag Growth International. You can find everything you need to know about Ag Growth International in the latest infographic research report. If you are no longer interested in Ag Growth International, 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.