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While STAAR Surgical Company (NASDAQ:STAA) might not be the most widely known stock at the moment, it led the NASDAQGM gainers with a relatively large price hike in the past couple of weeks. 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? Today I will analyse the most recent data on STAAR Surgical’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in STAAR Surgical?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18.81% above my intrinsic value, which means if you buy STAAR Surgical today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $70.66, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since STAAR Surgical’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will STAAR Surgical 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. 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. STAAR Surgical'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 STAA’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on STAA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.
So while earnings quality is important, it's equally important to consider the risks facing STAAR Surgical at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of STAAR Surgical.
If you are no longer interested in STAAR Surgical, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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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