Alpha Group (SZSE:002292), is not the largest company out there, but it saw a decent share price growth in the teens level on the SZSE 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? Today I will analyse the most recent data on Alpha Group's outlook and valuation to see if the opportunity still exists.
View our latest analysis for Alpha Group
What's The Opportunity In Alpha Group?
The stock is currently trading at CN¥7.82 on the share market, which means it is overvalued by 25% compared to my intrinsic value of CN¥6.28. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Alpha Group's share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Alpha Group generate?
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 revenues expected to grow by 36% over the next couple of years, the future seems bright for Alpha Group. If the level of expenses is able to be maintained, 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 well and truly priced in 002292's positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 002292 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on 002292 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for 002292, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Alpha Group, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Alpha Group you should know about.
If you are no longer interested in Alpha Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
