American River Bankshares (NASDAQ:AMRB), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $16.78 at one point, and dropping to the lows of $15.25. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether American River Bankshares’s current trading price of $15.77 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 American River Bankshares’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for American River Bankshares
What is American River Bankshares worth?
According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that American River Bankshares’s ratio of 29.07x is above its peer average of 17.12x, which suggests the stock is overvalued compared to the Banks industry. Furthermore, American River Bankshares’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will American River Bankshares generate?
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. In the upcoming year, American River Bankshares’s earnings are expected to increase by 61.28%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in AMRB’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe AMRB 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 AMRB for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for AMRB, 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 American River Bankshares. You can find everything you need to know about American River Bankshares in the latest infographic research report. If you are no longer interested in American River Bankshares, 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.