Why CSR Limited (ASX:CSR) Could Be Worth Watching

While CSR Limited (ASX:CSR) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the ASX over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine CSR’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CSR

Is CSR Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% below my intrinsic value, which means if you buy CSR today, you’d be paying a fair price for it. And if you believe the company’s true value is A$6.91, then there’s not much of an upside to gain from mispricing. 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?

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. However, with a negative profit growth of -8.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for CSR. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, CSR appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CSR for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CSR should the price fluctuate below its true value.

If you'd like to know more about CSR as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for CSR (1 is a bit concerning) you should be familiar with.

If you are no longer interested in CSR, 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.