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When Should You Buy Clearwater Paper Corporation (NYSE:CLW)?

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·3 min read
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Clearwater Paper Corporation (NYSE:CLW), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Clearwater Paper’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Clearwater Paper

Is Clearwater Paper Still Cheap?

The stock is currently trading at US$41.90 on the share market, which means it is overvalued by 20% compared to my intrinsic value of $34.84. This means that the buying opportunity has probably disappeared for now. Furthermore, Clearwater Paper’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. 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.

What kind of growth will Clearwater Paper generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted revenue growth of 7.2% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Clearwater Paper, at least in the short term.

What This Means For You

Are you a shareholder? CLW’s future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CLW 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 CLW for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Clearwater Paper, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Clearwater Paper (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Clearwater Paper, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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