When Should You Buy InvoCare Limited (ASX:IVC)?

InvoCare Limited (ASX:IVC), 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$12.15 at one point, and dropping to the lows of AU$10.75. 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 InvoCare's current trading price of AU$10.77 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 InvoCare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for InvoCare

What's the opportunity in InvoCare?

Great news for investors – InvoCare is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is A$13.69, but it is currently trading at AU$10.77 on the share market, meaning that there is still an opportunity to buy now. InvoCare’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of InvoCare 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 revenues expected to grow by a double-digit 23% over the next couple of years, the outlook is positive for InvoCare. If the level of expenses is able to be maintained, 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? Since IVC is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on IVC for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy IVC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

So while earnings quality is important, it's equally important to consider the risks facing InvoCare at this point in time. Our analysis shows 3 warning signs for InvoCare (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.

If you are no longer interested in InvoCare, 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. 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.
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