What’s Installed For Contagious Gaming Inc (TSXV:CNS)?
Contagious Gaming Inc (TSXV:CNS), a CADCA$613.93K small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase leisure products. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 12.76% in the upcoming year , and a strong near-term growth of 29.02% over the next couple of years. However, this rate came in below the growth rate of the Canadian stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether CNS is lagging or leading in the industry. Check out our latest analysis for Contagious Gaming
What’s the catalyst for CNS’s sector growth?
Although there is higher competition for consumer leisure time, due to the rise of new activities such as online streaming and mobile games, the whole industry has been expanding in various channels to better interact with its consumer. Traditional incumbents are forced to adapt or fall behind. In the past year, the industry delivered growth in the twenties, beating the Canadian market growth of 8.26%. CNS lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means CNS may be trading cheaper than its peers.
Is CNS and the sector relatively cheap?
The leisure industry is trading at a PE ratio of 20x, relatively similar to the rest of the Canadian stock market PE of 17x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12.82% compared to the market’s 9.62%, potentially illustrative of past tailwinds. Since CNS’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CNS’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CNS has been a leisure industry laggard in the past year. If your initial investment thesis is around the growth prospects of CNS, there are other leisure companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how CNS fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If CNS has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its leisure peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at CNS’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Contagious Gaming’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.
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.
