AutoNation, Inc. (NYSE:AN), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Let's examine AutoNation's valuation and outlook in more detail to determine if there's still a bargain opportunity.

Is AutoNation Still Cheap?

Great news for investors – AutoNation is still trading at a fairly cheap price. According to our valuation, the intrinsic value for the stock is $200.06, but it is currently trading at US$148 on the share market, meaning that there is still an opportunity to buy now. However, given that AutoNation'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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will AutoNation generate?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of AutoNation, it is expected to deliver a highly negative earnings growth in the next few years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although AN is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to AN, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you've been keeping an eye on AN for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into AutoNation, you'd also look into what risks it is currently facing. Be aware that AutoNation is showing 3 warning signs in our investment analysis and 2 of those are concerning...

If you are no longer interested in AutoNation, 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.