Should You Buy Cerus Corporation (NASDAQ:CERS) At $3.56?
Cerus Corporation (NASDAQ:CERS), a medical equipment company based in United States, received a lot of attention from a substantial price increase on the NasdaqGM in the over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Cerus’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Cerus
What’s the opportunity in Cerus?
Cerus appears to be overvalued according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 10.92x is currently well-above the industry average of 3.78x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Cerus’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Cerus generate?
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. Cerus’s earnings over the next few years are expected to increase by 55.40%, 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? It seems like the market has well and truly priced in Cerus’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Cerus should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on Cerus for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for Cerus, which means it’s worth diving deeper into other factors 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 Cerus. You can find everything you need to know about Cerus in the latest infographic research report. If you are no longer interested in Cerus, 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.
