At UK£1.66, Is Avation PLC (LON:AVAP) Worth Looking At Closely?

Simply Wall St · 10/17 05:05

Avation PLC (LON:AVAP), is not the largest company out there, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. Less-covered, small caps tend to present 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? Let’s examine Avation’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Avation

What's The Opportunity In Avation?

Great news for investors – Avation is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.74x is currently well-below the industry average of 14.42x, meaning that it is trading at a cheaper price relative to its peers. However, given that Avation’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 does the future of Avation look like?

earnings-and-revenue-growth
LSE:AVAP Earnings and Revenue Growth October 17th 2024

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. Avation's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since AVAP is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on AVAP for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AVAP. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

If you'd like to know more about Avation as a business, it's important to be aware of any risks it's facing. Be aware that Avation is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

If you are no longer interested in Avation, you can use our free platform to see our list of over 50 other stocks with a high growth potential.