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What Does CSR Limited's (ASX:CSR) Share Price Indicate?

Simply Wall St

CSR Limited (ASX:CSR), which is in the basic materials business, and is based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine CSR’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CSR

What's the opportunity in CSR?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.08% above my intrinsic value, which means if you buy CSR today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$2.88, there’s only an insignificant downside when the price falls to its real value. Furthermore, CSR’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will CSR generate?

ASX:CSR Past and Future Earnings April 18th 2020
ASX:CSR Past and Future Earnings April 18th 2020

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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for CSR, at least in the near future.

What this means for you:

Are you a shareholder? CSR 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 an eye on CSR for a while, now may not be the most advantageous 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. In addition to this, 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 gel your views on CSR 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 CSR. You can find everything you need to know about CSR in the latest infographic research report. If you are no longer interested in CSR, 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.