Shares of Alamos Gold Inc. (NYSE: AGI) are receiving a lot of investor interest as of late due to the stock’s 17.9% increase over the last month. Shareholders are now asking themselves whether the company’s current stock price is reflective of its true value or if shares have even further upside from here.
Let’s take a look at Alamos Gold’s value and outlook based on its most recent financial data to see if there are any catalysts for a price change.
What Is Alamos Gold Worth?
Welcoming news for investors, Alamos Gold is still trading at a fairly cheap price. According to our 9 valuation analyses, the intrinsic value for the stock is $6.99 per share and is currently trading at $5.84 in the market. This means that there is still an opportunity to buy now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$6.21||6.3%|
|5-yr DCF Revenue Exit||$5.42||-7.1%|
|Peer Revenue Multiples||$4.66||-20.3%|
|10-yr DCF EBITDA Exit||$8.32||42.4%|
|5-yr DCF EBITDA Exit||$8.23||40.9%|
|Peer EBITDA Multiples||$5.42||-7.2%|
|10-yr DCF Growth Exit||$9.43||61.5%|
|5-yr DCF Growth Exit||$9.71||66.3%|
|Dividend Discount Model (multi-stage)||$5.54||-5.1%|
Click on any of the analyses above to view the latest model with real-time data.
Alamos Gold’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of -0.56. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
How Much Growth Will Alamos Gold 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. 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.
source: finbox.io data explorer
With EBITDA expected to grow on average of 17.1% over the next couple years, the future certainly appears bright for Alamos Gold. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher share valuation.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
Alamos Gold’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
However, if you have not done so already, I highly recommend you complete your research on Alamos Gold by taking a look at the following:
Efficiency Metrics: how much free cash flow does Alamos Gold generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm’s free cash flow margin here.
Risk Metrics: what is Alamos Gold’s Altman Z score? It’s a famous formula used to predict the probability that a firm will go into bankruptcy within two years. View the company’s Altman Z score here.
Valuation Metrics: how much upside do shares of Alamos Gold have based on the Ben Graham Formula? Take a look at our Ben Graham Formula data explorer which also compares the company’s upside to its peers.
As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.