Is It Too Late To Consider Buying ASOS Plc (LON:ASC)?
ASOS Plc (LON:ASC), which is in the online retail business, and is based in United Kingdom, saw a double-digit share price rise of over 10% in the past couple of months on the AIM. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at ASOS’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for ASOS
What’s the opportunity in ASOS?
ASOS appears to be overvalued by 41.39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at UK£57.36 on the market compared to my intrinsic value of £40.57. This means that the opportunity to buy ASOS at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that ASOS’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 does the future of ASOS 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. 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 profit expected to grow by 78% over the next couple of years, the future seems bright for ASOS. 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? It seems like the market has well and truly priced in ASC’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe ASC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on ASC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for ASC, which means it’s worth diving deeper into other factors 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 ASOS. You can find everything you need to know about ASOS in the latest infographic research report. If you are no longer interested in ASOS, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
