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Is Cargojet Inc. (TSE:CJT) Potentially Undervalued?

Simply Wall St
·3 min read

Cargojet Inc. (TSE:CJT), might not be a large cap stock, but it led the TSX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Cargojet’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Cargojet

What is Cargojet worth?

According to my valuation model, Cargojet seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Cargojet today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CA$289.33, then there’s not much of an upside to gain from mispricing. What's more, Cargojet’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Cargojet?

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. 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. With revenues expected to grow by a double-digit 22% over the next couple of years, the outlook is positive for Cargojet. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CJT’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CJT, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Cargojet as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Cargojet you should be mindful of and 1 of them is a bit unpleasant.

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

This article by Simply Wall St is general in nature. 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.

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