Acadian Timber Corp. (TSE:ADN), which is in the forestry business, and is based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. 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 Acadian Timber’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Acadian Timber worth?
According to my valuation model, Acadian Timber seems to be fairly priced at around 17.75% above my intrinsic value, which means if you buy Acadian Timber today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth CA$11.61, there’s only an insignificant downside when the price falls to its real value. What's more, Acadian Timber’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Acadian Timber 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. Though in the case of Acadian Timber, it is expected to deliver a relatively unexciting earnings growth of 9.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? ADN’s 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 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 ADN, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Acadian Timber. You can find everything you need to know about Acadian Timber in the latest infographic research report. If you are no longer interested in Acadian Timber, 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 email@example.com. 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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