KCAP Financial Inc (NASDAQ:KCAP), a capital markets company based in United States, saw its share price hover around a small range of $3.09 to $3.28 over the last few weeks. But is this actually reflective of the share value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at KCAP Financial’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for KCAP Financial
What is KCAP Financial worth?
According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 21.96x is currently well-above the industry average of 15.95x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that KCAP Financial’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of KCAP Financial look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In KCAP Financial’s case, its earnings over the next year are expected to double, indicating an incredibly 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? KCAP’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe KCAP 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 an eye on KCAP for a while, 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 KCAP, 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 KCAP Financial. You can find everything you need to know about KCAP Financial in the latest infographic research report. If you are no longer interested in KCAP Financial, 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.