Is It Time To Buy Cara Operations Limited (TSX:CARA)?
Cara Operations Limited (TSX:CARA), a consumer services company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of $24.6 and falling to the lows of $21.21. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CARA's current trading price of $21.97 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 CARA’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for CARA
Is CARA still cheap?
According to my valuation model, CARA seems to be fairly priced at around 10% below my intrinsic value, which means if you buy CARA today, you’d be paying a reasonable price for it. And if you believe that CARA is really worth $24.42, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because CARA’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, CARA’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will CARA generate?
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 CARA future expectations. Though in the case of CARA, it is expected to deliver a relatively unexciting earnings growth of 7.18%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for CARA, at least in the near term.
What this means for you:
Are you a shareholder? CARA’s optimistic 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 financial strength of the company. Have these factors changed since the last time you looked at CARA? 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 CARA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CARA, which means it’s worth further examining 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 Cara Operations. You can find everything you need to know about CARA in the latest infographic research report. If you are no longer interested in Cara Operations, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
