Is Now The Time To Look At Buying CAR Group Limited (ASX:CAR)?

While CAR Group Limited (ASX:CAR) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at CAR Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for CAR Group

What's The Opportunity In CAR Group?

According to my valuation model, CAR Group seems to be fairly priced at around 1.16% above my intrinsic value, which means if you buy CAR Group today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth A$27.76, there’s only an insignificant downside when the price falls to its real value. What's more, CAR Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from CAR Group?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for CAR Group, at least in the near future.

What This Means For You

Are you a shareholder? Currently, CAR 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 de-risk your portfolio. Is your current exposure to the stock beneficial 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 tabs on CAR for a while, now may not be the most advantageous 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. In addition to this, 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 gel your views on CAR should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 3 warning signs for CAR Group (1 is potentially serious!) that we believe deserve your full attention.

If you are no longer interested in CAR Group, 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.