Central Pacific Financial Corp (NYSE:CPF), operating in the financial services industry based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $31.32 and falling to the lows of $27.47. 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 Central Pacific Financial’s current trading price of $28.33 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 Central Pacific Financial’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 Central Pacific Financial
What’s the opportunity in Central Pacific Financial?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Central Pacific Financial’s ratio of 20.9x is trading slightly above its industry peers’ ratio of 17.35x, which means if you buy Central Pacific Financial today, you’d be paying a relatively reasonable price for it. And if you believe Central Pacific Financial should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Central Pacific Financial’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Central Pacific Financial generate?
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. With profit expected to grow by 61.41% over the next couple of years, the future seems bright for Central Pacific Financial. 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? It seems like the market has already priced in CPF’s positive outlook, 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 CPF? 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 tabs on CPF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CPF, 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 Central Pacific Financial. You can find everything you need to know about Central Pacific Financial in the latest infographic research report. If you are no longer interested in Central Pacific Financial, 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.