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Is Now An Opportune Moment To Examine CoreCivic, Inc. (NYSE:CXW)?

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·3 min read
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While CoreCivic, Inc. (NYSE:CXW) might not be the most widely known stock at the moment, it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at CoreCivic’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for CoreCivic

What is CoreCivic worth?

Great news for investors – CoreCivic is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.95x is currently well-below the industry average of 22.03x, meaning that it is trading at a cheaper price relative to its peers. CoreCivic’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of CoreCivic look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. Though in the case of CoreCivic, it is expected to deliver a relatively unexciting earnings growth of 1.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for CoreCivic, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since CXW is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CXW for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CXW. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing CoreCivic at this point in time. Be aware that CoreCivic is showing 2 warning signs in our investment analysis and 1 of those is concerning...

If you are no longer interested in CoreCivic, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.