U.S. Markets closed

Should You Think About Buying Convatec Group Plc (LON:CTEC) Now?

Simply Wall St

Convatec Group Plc (LON:CTEC), which is in the medical equipment business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the LSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Convatec Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Convatec Group

What's the opportunity in Convatec Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.3% below my intrinsic value, which means if you buy Convatec Group today, you’d be paying a fair price for it. And if you believe the company’s true value is £1.94, then there’s not much of an upside to gain from mispricing. Furthermore, Convatec Group’s low beta implies that the stock is less volatile than the wider market.

What does the future of Convatec Group look like?

LSE:CTEC Past and Future Earnings, September 26th 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. 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 Convatec Group, it is expected to deliver a relatively unexciting earnings growth of 9.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? CTEC’s future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CTEC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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 Convatec Group. You can find everything you need to know about Convatec Group in the latest infographic research report. If you are no longer interested in Convatec 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.