At AU$9.18, is Appen Limited (ASX:APX) worth a close look?
Appen Limited (ASX:APX), is not the biggest company in the market, but it has received a lot of attention due to a substantial price movement on the ASX over the past few months, rising to 12, AU$16 at one point and falling to lows. from AU$9.18. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. One question to answer is does Appen’s current price of AU$9.18 reflect the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Appen’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Appen
What is the opportunity in Appen?
Good news for investors – Appen is still trading at a fairly cheap price according to my multiple price model, where I compare the company’s price-earnings ratio to the industry average. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find Appen’s ratio of 27.21x to be below its average of 34.98x, indicating that the stock is trading at a lower price than the IT industry. What’s more interesting is that Appen’s stock price is quite stable, which could mean two things: one, it may take a while for the stock price to approach its industry peers, and second, there may be less chance of buying low in the future once it reaches that value. This is because the stock is less volatile than the broader market given its low beta.
What does the future of Appen look like?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. Appen’s earnings over the next few years are expected to increase by 76%, indicating a very optimistic future. This should lead to more robust cash flow, fueling higher share value.
What does this mean to you :
Are you a shareholder? Given that the APX is currently below the industry’s PE ratio, now may be the perfect time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it appears that this growth has yet to be fully priced into the stock price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping tabs on APX for a while, it might be time to get into the stock. Its prosperous future earnings outlook is yet to be fully reflected in the current share price, meaning it’s not too late to buy APX. But before making investment decisions, consider other factors such as the strength of its balance sheet, in order to make an informed assessment.
Keep in mind that when it comes to analyzing a stock, the risks involved should be noted. At Simply Wall St, we found 1 warning sign for Appen and we think they deserve your attention.
If you are no longer interested in Appen, you can use our free platform to view our list of over 50 other stocks with high growth potential.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.