CSR Limited (ASX:CSR), is not the largest company out there, but it saw a decent share price growth in the teens level on the ASX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine CSR’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is CSR worth?
According to my valuation model, CSR seems to be fairly priced at around 7.65% above my intrinsic value, which means if you buy CSR today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is A$5.16, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, CSR has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from CSR?
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. With profit expected to grow by 24% over the next couple of years, the future seems bright for CSR. 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? It seems like the market has already priced in CSR’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 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 CSR, 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 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 CSR as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for CSR (1 is significant!) and we strongly recommend you look at them before investing.
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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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