Yahoo Finance When Should You Buy Advanced Oncotherapy PLC (LON:AVO)?
Advanced Oncotherapy PLC (LON:AVO), a healthcare company based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the AIM. As a small cap stock, hardly covered by any analysts, 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 Advanced Oncotherapy’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Advanced Oncotherapy
Is Advanced Oncotherapy still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.99x is currently trading slightly below its industry peers’ ratio of 1.44x, which means if you buy Advanced Oncotherapy today, you’d be paying a relatively reasonable price for it. And if you believe Advanced Oncotherapy should be trading in this range, then there isn’t much 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 Advanced Oncotherapy’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 does the future of Advanced Oncotherapy look like?
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 the company’s future expectations. However, with a negative profit growth of -16.73% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Advanced Oncotherapy. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, AVO appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 AVO, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on AVO 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 crystalize your views on AVO 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 Advanced Oncotherapy. You can find everything you need to know about Advanced Oncotherapy in the latest infographic research report. If you are no longer interested in Advanced Oncotherapy, 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.
