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Is Now The Time To Look At Buying Avation PLC (LON:AVAP)?

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·3 min read
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While Avation PLC (LON:AVAP) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Avation’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Avation

What is Avation worth?

According to my valuation model, Avation seems to be fairly priced at around 7.1% below my intrinsic value, which means if you buy Avation today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £1.22, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Avation’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.

What kind of growth will Avation generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. However, with a relatively muted revenue growth of 2.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Avation, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AVAP’s future outlook, 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 tabs on AVAP, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

So while earnings quality is important, it's equally important to consider the risks facing Avation at this point in time. For example, we've found that Avation has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Avation, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.