Actua Corporation (NASDAQ:ACTA), a internet software and services company based in United States, led the NasdaqGS gainers with a relatively large price hike in the past couple of weeks. Less covered, small-stocks like ACTA 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 ACTA still be trading at a low price relative to its actual value? Let’s take a look at ACTA’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Actua
What's the opportunity in ACTA?
Good news, investors! ACTA is still a bargain right now. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that ACTA’s ratio of 1.6x is below its peer average of 4.6x, which suggests the stock is undervalued compared to the internet software and services industry. However, given that ACTA’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will ACTA generate?
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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for ACTA, at least in the near future.
What this means for you:
Are you a shareholder? Although ACTA is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to ACTA, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on ACTA for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Actua. You can find everything you need to know about ACTA in the latest infographic research report. If you are no longer interested in Actua, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.