Should You Buy Capital Drilling Limited (LSE:CAPD)?
Capital Drilling Limited (LSE:CAPD), an energy company based in Mauritius, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £0.48 and falling to the lows of £0.38. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CAPD's current trading price of £0.4 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 CAPD’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Capital Drilling
Is CAPD still cheap?
According to my valuation model, CAPD seems to be fairly priced at around 8% below my intrinsic value, which means if you buy CAPD today, you’d be paying a reasonable price for it. And if you believe CAPD’s true value is £0.43, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, CAPD’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for CAPD to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will CAPD 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. With revenues expected to grow by a double-digit 14.84% in the upcoming year, the outlook is positive for CAPD. If the level of expenses is able to be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? CAPD’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 CAPD? 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 an eye on CAPD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for CAPD, which 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 Capital Drilling. You can find everything you need to know about CAPD in the latest infographic research report. If you are no longer interested in Capital Drilling, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
