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Today we're going to take a look at the well-established The Cooper Companies, Inc. (NYSE:COO). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$361 at one point, and dropping to the lows of US$319. 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 Cooper Companies' current trading price of US$349 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cooper Companies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Cooper Companies still cheap?
According to my valuation model, the stock is currently overvalued by about 25%, trading at US$349 compared to my intrinsic value of $279.68. This means that the buying opportunity has probably disappeared for now. Furthermore, Cooper Companies’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 true value, 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 Cooper Companies look like?
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. With profit expected to more than double over the next couple of years, the future seems bright for Cooper Companies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in COO’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe COO 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 tabs on COO for some time, 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 optimistic prospect is encouraging for COO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Cooper Companies at this point in time. In terms of investment risks, we've identified 4 warning signs with Cooper Companies, and understanding these should be part of your investment process.
If you are no longer interested in Cooper Companies, 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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