Yahoo Finance Have Investors Priced In AJ Lucas Group Limited’s (ASX:AJL) Growth?
AJ Lucas Group Limited (ASX:AJL), a construction company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. 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? Let’s take a look at AJ Lucas Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. View out our latest analysis for AJ Lucas Group
What is AJ Lucas Group worth?
According to my relative valuation model, the stock 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 AJ Lucas Group’s ratio of 2.87x is trading slightly above its industry peers’ ratio of 1.36x, which means if you buy AJ Lucas Group today, you’d be paying a relatively fair price for it. And if you believe AJ Lucas Group should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like AJ Lucas Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of AJ Lucas Group 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. Though in the case of AJ Lucas Group, it is expected to deliver a relatively unexciting earnings growth of 4.45%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for AJ Lucas Group, at least in the near term.
What this means for you:
Are you a shareholder? AJL’s 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 track record of its management team. Have these factors changed since the last time you looked at AJL? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on AJL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean 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 AJ Lucas Group. You can find everything you need to know about AJ Lucas Group in the latest infographic research report. If you are no longer interested in AJ Lucas Group, 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.
