AO World plc (LON:AO.), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK￡1.19 and falling to the lows of UK￡1.05. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether AO World's current trading price of UK￡1.15 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AO World’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for AO World

What's The Opportunity In AO World?

According to our valuation model, AO World seems to be fairly priced at around 6.6% below our intrinsic value, which means if you buy AO World today, you’d be paying a fair price for it. And if you believe that the stock is really worth ￡1.23, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that AO World’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will AO World 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. AO World's earnings over the next few years are expected to increase by 67%, 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? AO.’s optimistic future growth appears to have been factored into the current share price, 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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AO., now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect 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.