At €3.14, Is CTT – Correios De Portugal, S.A. (ELI:CTT) Worth Looking At Closely?

CTT – Correios De Portugal, S.A. (ELI:CTT), which is in the logistics business, and is based in Portugal, received a lot of attention from a substantial price increase on the ENXTLS over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at CTT – Correios De Portugal’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for CTT – Correios De Portugal

Is CTT – Correios De Portugal still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 15.18x is currently trading slightly below its industry peers’ ratio of 15.89x, which means if you buy CTT – Correios De Portugal today, you’d be paying a fair price for it. And if you believe CTT – Correios De Portugal should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like CTT – Correios De Portugal’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will CTT – Correios De Portugal generate?

ENXTLS:CTT Past and Future Earnings, January 27th 2020
ENXTLS:CTT Past and Future Earnings, January 27th 2020

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. CTT – Correios De Portugal’s earnings over the next few years are expected to increase by 59%, 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 already priced in CTT’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 CTT? 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 CTT, 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 CTT, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 CTT – Correios De Portugal. You can find everything you need to know about CTT – Correios De Portugal in the latest infographic research report. If you are no longer interested in CTT – Correios De Portugal, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.