At US$49.06, Is It Time To Put CDK Global, Inc. (NASDAQ:CDK) On Your Watch List?
While CDK Global, Inc. (NASDAQ:CDK) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on CDK Global’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for CDK Global
Is CDK Global still cheap?
Good news, investors! CDK Global is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.63x is currently well-below the industry average of 59.13x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because CDK Global’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, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from CDK Global?
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. Though in the case of CDK Global, it is expected to deliver a relatively unexciting earnings growth of 9.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for CDK Global, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since CDK is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on CDK for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CDK. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with CDK Global, and understanding it should be part of your investment process.
If you are no longer interested in CDK Global, 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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