Apollo Tourism & Leisure Ltd (ASX:ATL), which is in the auto business, and is based in Australia, led the ASX gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Apollo Tourism & Leisure’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Apollo Tourism & Leisure still cheap?
According to my valuation model, Apollo Tourism & Leisure seems to be fairly priced at around 15% below my intrinsic value, which means if you buy Apollo Tourism & Leisure today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$0.55, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Apollo Tourism & Leisure’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Apollo Tourism & Leisure?
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. Apollo Tourism & Leisure’s 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? ATL’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 track record of its management team. 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 tabs on ATL, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Apollo Tourism & Leisure. You can find everything you need to know about Apollo Tourism & Leisure in the latest infographic research report. If you are no longer interested in Apollo Tourism & Leisure, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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