Atrium Mortgage Investment Corporation (TSE:AI), operating in the financial services industry based in Canada, saw a significant share price rise of over 20% in the past couple of months on the TSX. 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 Atrium Mortgage Investment’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Atrium Mortgage Investment?
According to my valuation model, Atrium Mortgage Investment seems to be fairly priced at around 9.3% below my intrinsic value, which means if you buy Atrium Mortgage Investment today, you’d be paying a fair price for it. And if you believe the company’s true value is CA$12.07, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Atrium Mortgage Investment’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Atrium Mortgage Investment?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Atrium Mortgage Investment, it is expected to deliver a relatively unexciting earnings growth of 1.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Atrium Mortgage Investment, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in AI’s future 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 AI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Atrium Mortgage Investment. You can find everything you need to know about Atrium Mortgage Investment in the latest infographic research report. If you are no longer interested in Atrium Mortgage Investment, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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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. Thank you for reading.