In This Article:
American Superconductor Corporation (NASDAQ:AMSC), which is in the electrical business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on American Superconductor’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for American Superconductor
What’s the opportunity in American Superconductor?
American Superconductor appears to be overvalued by 27.33% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$10.96 on the market compared to my intrinsic value of $8.61. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that American Superconductor’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 American Superconductor 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. Though in the case of American Superconductor, 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? If you believe AMSC is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 an eye on AMSC for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?