Is Now The Time To Look At Buying Coda Octopus Group, Inc. (NASDAQ:CODA)?
While Coda Octopus Group, Inc. (NASDAQ:CODA) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NASDAQCM. As a small cap stock, hardly covered by any analysts, 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 examine Coda Octopus Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Coda Octopus Group
Is Coda Octopus Group Still Cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Coda Octopus Group’s ratio of 19.74x is trading slightly above its industry peers’ ratio of 16.06x, which means if you buy Coda Octopus Group today, you’d be paying a relatively reasonable price for it. And if you believe Coda Octopus Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Coda Octopus Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Coda Octopus Group 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. In the upcoming year, Coda Octopus Group's earnings are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? CODA’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CODA? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on CODA, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CODA, 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.
So while earnings quality is important, it's equally important to consider the risks facing Coda Octopus Group at this point in time. Case in point: We've spotted 1 warning sign for Coda Octopus Group you should be aware of.
If you are no longer interested in Coda Octopus Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
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