Why Codan Limited (ASX:CDA) Could Be Worth Watching

Codan Limited (ASX:CDA), is not the largest company out there, but it saw a significant share price rise of 64% in the past couple of months on the ASX. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. 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, what if the stock is still a bargain? Today we will analyse the most recent data on Codan’s outlook and valuation to see if the opportunity still exists.

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What Is Codan Worth?

According to our valuation model, the stock is currently overvalued by about 35%, trading at AU$30.39 compared to our intrinsic value of A$22.43. This means that the opportunity to buy Codan at a good price has disappeared! Another thing to keep in mind is that Codan’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

See our latest analysis for Codan

What kind of growth will Codan generate?

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. 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. With profit expected to grow by 78% over the next couple of years, the future seems bright for Codan. 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? CDA’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CDA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CDA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CDA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

It can be quite valuable to consider what analysts expect for Codan from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Codan, 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.