Should You Think About Buying Computershare Limited (ASX:CPU) Now?

Computershare Limited (ASX:CPU), might not be a large cap stock, but it saw a decent share price growth in the teens level on the ASX over the last few months. 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 examine Computershare’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Computershare

Is Computershare still cheap?

According to my valuation model, Computershare seems to be fairly priced at around 13.30% above my intrinsic value, which means if you buy Computershare today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is A$12.68, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Computershare’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Computershare look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Computershare's earnings over the next few years are expected to increase by 61%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? CPU’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on CPU, now may not be the most optimal 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 want to dive deeper into Computershare, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Computershare you should know about.

If you are no longer interested in Computershare, 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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