At €7.98, Is Aeroporto Guglielmo Marconi di Bologna S.p.A. (BIT:ADB) Worth Looking At Closely?

Aeroporto Guglielmo Marconi di Bologna S.p.A. (BIT:ADB), which is in the infrastructure business, and is based in Italy, led the BIT gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, hardly covered by any analysts, 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 take a look at Aeroporto Guglielmo Marconi di Bologna’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Aeroporto Guglielmo Marconi di Bologna

Is Aeroporto Guglielmo Marconi di Bologna still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’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 14x is currently trading slightly above its industry peers’ ratio of 9.45x, which means if you buy Aeroporto Guglielmo Marconi di Bologna today, you’d be paying a relatively reasonable price for it. And if you believe Aeroporto Guglielmo Marconi di Bologna should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Aeroporto Guglielmo Marconi di Bologna’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Aeroporto Guglielmo Marconi di Bologna 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. However, with a negative profit growth of -1.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aeroporto Guglielmo Marconi di Bologna. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? ADB seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ADB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ADB for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ADB should the price fluctuate below the industry PE ratio.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Aeroporto Guglielmo Marconi di Bologna. You can find everything you need to know about Aeroporto Guglielmo Marconi di Bologna in the latest infographic research report. If you are no longer interested in Aeroporto Guglielmo Marconi di Bologna, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.