What Does Collins Foods Limited's (ASX:CKF) Share Price Indicate?

Collins Foods Limited (ASX:CKF), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to AU$11.01 at one point, and dropping to the lows of AU$8.33. 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$8.33 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 our latest analysis for Collins Foods

What is Collins Foods worth?

According to my valuation model, Collins Foods seems to be fairly priced at around 6.8% 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$8.94, then there’s not much of an upside to gain from mispricing. Furthermore, Collins Foods’s low beta implies that the stock is less volatile than the wider market.

What does the future of Collins Foods look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 60% over the next couple of years, the future seems bright for Collins Foods. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CKF’s optimistic future growth appears to have been factored into the current share price, 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CKF, 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 the company, 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.

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. In terms of investment risks, we've identified 2 warning signs with Collins Foods, and understanding them should be part of your investment process.

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.