Is There Now An Opportunity In Cervus Equipment Corporation (TSE:CERV)?
Cervus Equipment Corporation (TSE:CERV), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$17.64 and falling to the lows of CA$14.78. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cervus Equipment's current trading price of CA$16.11 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cervus Equipment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Cervus Equipment
What is Cervus Equipment worth?
Good news, investors! Cervus Equipment is still a bargain right now. My valuation model shows that the intrinsic value for the stock is CA$21.08, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Cervus Equipment’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Cervus Equipment generate?
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 Cervus Equipment, it is expected to deliver a negative earnings growth of -19%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although CERV is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to CERV, 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 an eye on CERV for a while, but hesitant on making the leap, I recommend you research further 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.
So while earnings quality is important, it's equally important to consider the risks facing Cervus Equipment at this point in time. For example, we've found that Cervus Equipment has 3 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Cervus Equipment, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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.
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