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Is Now An Opportune Moment To Examine Covenant Transportation Group, Inc. (NASDAQ:CVTI)?

Simply Wall St

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Covenant Transportation Group, Inc. (NASDAQ:CVTI), which is in the transportation business, and is based in United States, saw a decent share price growth in the teens level on the NASDAQGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Covenant Transportation Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Covenant Transportation Group

What's the opportunity in Covenant Transportation Group?

Good news, investors! Covenant Transportation Group is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Covenant Transportation Group’s ratio of 6.38x is below its peer average of 16.94x, which suggests the stock is undervalued compared to the Transportation industry. What’s more interesting is that, Covenant Transportation Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Covenant Transportation Group generate?

NasdaqGS:CVTI Past and Future Earnings, July 2nd 2019

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. However, with a negative profit growth of -19% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Covenant Transportation Group. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although CVTI is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to CVTI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on CVTI for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Covenant Transportation Group. You can find everything you need to know about Covenant Transportation Group in the latest infographic research report. If you are no longer interested in Covenant Transportation Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.