Today we’re going to take a look at the well-established Aviva plc (LSE:AV.). The company’s stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of £4.9 to £5.15. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Aviva’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 Aviva
What’s the opportunity in Aviva?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% below my intrinsic value, which means if you buy Aviva today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £6.24, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Aviva’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Aviva look like?
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. Aviva’s earnings over the next few years are expected to increase by 71.98%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in Aviva’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 financial strength of the company. 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 Aviva, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.