While Alamo Group Inc. (NYSE:ALG) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Alamo Group’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Alamo Group
Is Alamo Group still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.09% above my intrinsic value, which means if you buy Alamo Group today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $136.10, there’s only an insignificant downside when the price falls to its real value. What’s more, Alamo Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Alamo Group look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 70% over the next couple of years, the future seems bright for Alamo Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in ALG’s positive outlook, 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 the stock? 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 ALG, 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 the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it’s worth noting the risks involved. While conducting our analysis, we found that Alamo Group has 2 warning signs and it would be unwise to ignore them.
If you are no longer interested in Alamo Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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