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Is It Too Late To Consider Buying Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI)?

Simply Wall St

Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), operating in the financial services industry based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$18.46 and falling to the lows of US$15.97. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Atlantic Capital Bancshares's current trading price of US$16.96 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Atlantic Capital Bancshares’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Atlantic Capital Bancshares

What's the opportunity in Atlantic Capital Bancshares?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.3x is currently trading slightly above its industry peers’ ratio of 12.42x, which means if you buy Atlantic Capital Bancshares today, you’d be paying a relatively fair price for it. And if you believe Atlantic Capital Bancshares should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Atlantic Capital Bancshares’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Atlantic Capital Bancshares generate?

NasdaqGS:ACBI Past and Future Earnings, October 11th 2019
NasdaqGS:ACBI Past and Future Earnings, October 11th 2019

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. However, with a negative profit growth of -4.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Atlantic Capital Bancshares. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? ACBI seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ACBI, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ACBI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ACBI should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Atlantic Capital Bancshares. You can find everything you need to know about Atlantic Capital Bancshares in the latest infographic research report. If you are no longer interested in Atlantic Capital Bancshares, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.