Computershare Limited (ASX:CPU), a it services company based in Australia, saw a decent share price growth in the teens level on the ASX over the last few months. 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? Let’s examine Computershare’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Computershare
What’s the opportunity in Computershare?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10% below my intrinsic value, which means if you buy Computershare today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$18.22, then there’s not much of an upside to gain from mispricing. Furthermore, Computershare’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Computershare generate?
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. With profit expected to grow by 27.73% over the next couple of years, the future seems bright for Computershare. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in Computershare’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 track record of its management team. 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 tabs on Computershare, now may not be the most optimal 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.