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What Does Central Pacific Financial Corp.'s (NYSE:CPF) Share Price Indicate?

Simply Wall St

Central Pacific Financial Corp. (NYSE:CPF), operating in the financial services industry based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of US$30.38 and falling to the lows of US$27.60. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Central Pacific Financial's current trading price of US$29.44 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 is Central Pacific Financial worth?

According to my valuation model, Central Pacific Financial seems to be fairly priced at around 7.8% below my intrinsic value, which means if you buy Central Pacific Financial today, you’d be paying a fair price for it. And if you believe the company’s true value is $31.92, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Central Pacific Financial’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Central Pacific Financial generate?

NYSE:CPF Past and Future Earnings, January 6th 2020

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. Though in the case of Central Pacific Financial, it is expected to deliver a negative earnings growth of -10%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? CPF seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CPF for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CPF should the price fluctuate below its true value.

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.

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.

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. Thank you for reading.