Cal-Maine Foods Inc (NASDAQ:CALM), a food company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NasdaqGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Cal-Maine Foods’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Cal-Maine Foods
Is Cal-Maine Foods still cheap?
Cal-Maine Foods appears to be overvalued by 86% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$47.20 on the market compared to my intrinsic value of $25.43. Not the best news for investors looking to buy! Another thing to keep in mind is that Cal-Maine Foods’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Cal-Maine Foods?
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. 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. Cal-Maine Foods’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? CALM’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CALM should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CALM for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CALM, which means it’s worth diving deeper into other factors 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 Cal-Maine Foods. You can find everything you need to know about Cal-Maine Foods in the latest infographic research report. If you are no longer interested in Cal-Maine Foods, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.