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What Does Canaccord Genuity Group Inc.'s (TSE:CF) Share Price Indicate?

Simply Wall St

Canaccord Genuity Group Inc. (TSE:CF), which is in the capital markets business, and is based in Canada, saw a double-digit share price rise of over 10% in the past couple of months on the TSX. As a small cap stock, hardly covered by any analysts, 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 take a look at Canaccord Genuity Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Canaccord Genuity Group

Is Canaccord Genuity Group still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.4x is currently trading slightly below its industry peers’ ratio of 10.19x, which means if you buy Canaccord Genuity Group today, you’d be paying a reasonable price for it. And if you believe that Canaccord Genuity Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Canaccord Genuity Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Canaccord Genuity Group look like?

TSX:CF Past and Future Earnings, July 31st 2019

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. 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 12% over the next couple of years, the outlook is positive for Canaccord Genuity Group. 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? It seems like the market has already priced in CF’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 financial strength of the company. Have these factors changed since the last time you looked at CF? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping an eye on CF, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for CF, 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 Canaccord Genuity Group. You can find everything you need to know about Canaccord Genuity Group in the latest infographic research report. If you are no longer interested in Canaccord Genuity Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.