Are You Backing The Right Horse With Cinemaison 3D Inc (TSXV:CIOP)?
Cinemaison 3D Inc (TSXV:CIO.P), a CAD$0.00 small-cap, is a capital market firm operating in an industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Many banks and capital markets firms, particularly the large, complex institutions, have been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, negative growth in the upcoming year, and an optimistic near-term growth of 29 percent over the next couple of years. However, this rate came in below the growth rate of the Canadian stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the capital markets sector right now. Today, I will analyse the industry outlook, and also determine whether CIO.P is a laggard or leader relative to its financial sector peers. Check out our latest analysis for Cinemaison 3D
What’s the catalyst for CIO.P's sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth of 2 percent, though still underperforming the wider Canadian stock market. Given the lack of analyst consensus in CIO.P’s outlook, we could potentially assume the stock’s growth rate broadly follows its capital markets industry peers. This means it is an attractive growth stock relative to the wider Canadian stock market.
Is CIO.P and the sector relatively cheap?
Capital markets companies are typically trading at a PE of 29 times, relatively similar to the rest of the Canadian stock market PE of 24 times. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 9 percent compared to the market’s 13 percent, potentially indicative of past headwinds. Since CIO.P’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CIO.P’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Capital markets stocks are currently expected to grow slower than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards lower-growth. If growth was one of your main investment catalyst in the sector, now would be the time to revisit your holdings in CIO.P. Keep in mind the sector is trading relatively in-line with the rest of the market, which may mean you’ll be selling out at a reasonable price.
Are you a potential investor? The financial sector’s below-market growth and average valuation hardly makes it an exciting investment case. If you’re looking for a high-growth stock with potential mispricing, it seems like capital markets companies like CIO.P isn’t the right place to look. However, if you’re interested in the stock for other reasons, I suggest you research more into the company’s cash flow as well as its financial health in order to gain a holistic view of the stock.
For a deeper dive into Cinemaison 3D's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
