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Is It Time To Consider Buying Currency Exchange International, Corp. (TSE:CXI)?

Simply Wall St

Currency Exchange International, Corp. (TSE:CXI), which is in the consumer finance business, and is based in United States, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$23.10 at one point, and dropping to the lows of CA$18.90. 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 Currency Exchange International's current trading price of CA$18.90 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 Currency Exchange International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Currency Exchange International

Is Currency Exchange International still cheap?

Currency Exchange International appears to be overvalued according to my relative valuation model. 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 Currency Exchange International’s ratio of 29.01x is above its peer average of 9.38x, which suggests the stock is overvalued compared to the Consumer Finance industry. In addition to this, it seems like Currency Exchange International’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Currency Exchange International look like?

TSX:CXI Past and Future Earnings, September 25th 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. In the upcoming year, Currency Exchange International’s earnings are expected to increase by 46%, 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? It seems like the market has well and truly priced in CXI’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 CXI 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 CXI for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for CXI, which means it’s worth diving deeper into other factors 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 Currency Exchange International. You can find everything you need to know about Currency Exchange International in the latest infographic research report. If you are no longer interested in Currency Exchange International, 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.