Is It Too Late To Consider Buying Bubs Australia Limited (ASX:BUB)?
While Bubs Australia Limited (ASX:BUB) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the ASX over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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? Let’s examine Bubs Australia’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Bubs Australia
What's the opportunity in Bubs Australia?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.10% above my intrinsic value, which means if you buy Bubs Australia today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth A$0.34, there’s only an insignificant downside when the price falls to its real value. Furthermore, Bubs Australia’s low beta implies that the stock is less volatile than the wider market.
What does the future of Bubs Australia look like?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 49% over the next couple of years, the future seems bright for Bubs Australia. 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 BUB’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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on BUB, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Bubs Australia you should be aware of.
If you are no longer interested in Bubs Australia, 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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