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Oceania Healthcare Limited (NZSE:OCA), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NZSE over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Oceania Healthcare’s outlook and valuation to see if the opportunity still exists.
Is Oceania Healthcare still cheap?
Great news for investors – Oceania Healthcare is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is NZ$1.95, but it is currently trading at NZ$1.36 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Oceania Healthcare’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Oceania Healthcare?
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. 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 revenues expected to grow by 33% over the next couple of years, the future seems bright for Oceania Healthcare. If the level of expenses is able to be maintained, 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? Since OCA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on OCA for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy OCA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Oceania Healthcare and we think they deserve your attention.
If you are no longer interested in Oceania Healthcare, 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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