CECO Environmental Corp. (NASDAQ:CECE), which is in the commercial services business, and is 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 stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on CECO Environmental’s outlook and valuation to see if the opportunity still exists.
Is CECO Environmental still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 CECO Environmental’s ratio of 27.06x is trading slightly above its industry peers’ ratio of 26.44x, which means if you buy CECO Environmental today, you’d be paying a relatively fair price for it. And if you believe that CECO Environmental should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, CECO Environmental’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of CECO Environmental look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. CECO Environmental’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? It seems like the market has already priced in CECE’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CECE? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on CECE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for CECE, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 CECO Environmental. You can find everything you need to know about CECO Environmental in the latest infographic research report. If you are no longer interested in CECO Environmental, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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