East West Bancorp Inc (NASDAQ:EWBC), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $66.85 at one point, and dropping to the lows of $52.1. 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 East West Bancorp’s current trading price of $52.1 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at East West Bancorp’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in East West Bancorp?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.1% below my intrinsic value, which means if you buy East West Bancorp today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $56.09, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because East West Bancorp’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from East West Bancorp?
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 profit expected to grow by 30% over the next couple of years, the future seems bright for East West Bancorp. 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? EWBC’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 track record of its management team. 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 EWBC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on East West Bancorp. You can find everything you need to know about East West Bancorp in the latest infographic research report. If you are no longer interested in East West Bancorp, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.