Chegg Inc (NYSE:CHGG), a diversified consumer services company based in United States, received a lot of attention from a substantial price movement on the NYSE in the over the last few months, increasing to $16.48 at one point, and dropping to the lows of $13.78. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CHGG’s current trading price of $14.74 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CHGG’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Chegg
Is CHGG still cheap?The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 4.3x is currently trading slightly below its industry peers’ ratio of 4.4x, which means if you buy CHGG today, you’d be paying a relatively reasonable price for it. And if you believe CHGG should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since CHGG’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 CHGG moves relative to the rest of the market.
What does the future of CHGG look like?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at CHGG future expectations. In the upcoming year, CHGG’s earnings are expected to increase by 85.94%, 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 CHGG’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 CHGG? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CHGG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CHGG, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Chegg. You can find everything you need to know about CHGG in the latest infographic research report. If you are no longer interested in Chegg, you can use our free platform to see my list of over 50 other stocks with a high growth potential.