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While ALS Limited (ASX:ALQ) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$11.52 at one point, and dropping to the lows of AU$9.45. 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 ALS' current trading price of AU$9.78 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ALS’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is ALS worth?
According to my valuation model, ALS seems to be fairly priced at around 11.91% above my intrinsic value, which means if you buy ALS today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is A$8.74, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, ALS has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will ALS generate?
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. ALS' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ALQ’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on ALQ, 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. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of ALS.
If you are no longer interested in ALS, 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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