Why Aptose Biosciences Inc (TSX:APS) Could Be A Buy
Aptose Biosciences Inc (TSX:APS), a biotechnology company based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. 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 APS’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Aptose Biosciences
Is APS still cheap?
According to my relative valuation model, APS seems to be currently fairly priced. In this instance, I’ve used the price-to-book (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 APS’s ratio of 3.4x is trading slightly above its industry peers’ ratio of 1.8x, which means if you buy APS today, you’d be paying a relatively fair price for it. And if you believe APS should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that APS’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will APS generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at APS future expectations. With profit expected to grow by 41.43% over the next couple of years, the future seems bright for APS. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? APS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at APS? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on APS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for APS, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Aptose Biosciences. You can find everything you need to know about APS in the latest infographic research report. If you are no longer interested in Aptose Biosciences, 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.
