At AU$8.05, Is It Time To Put Collins Foods Limited (ASX:CKF) On Your Watch List?

While Collins Foods Limited (ASX:CKF) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ASX, rising to highs of AU$10.40 and falling to the lows of AU$8.05. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Collins Foods' current trading price of AU$8.05 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 Collins Foods’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out the opportunities and risks within the AU Hospitality industry.

What Is Collins Foods Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy Collins Foods today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$9.73, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Collins Foods’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Collins Foods?

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. Collins Foods' earnings over the next few years are expected to increase by 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 CKF’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 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 an eye on CKF, 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 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.

If you'd like to know more about Collins Foods as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Collins Foods you should know about.

If you are no longer interested in Collins Foods, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.