Is It Time To Consider Buying Colabor Group Inc. (TSE:GCL)?

While Colabor Group Inc. (TSE:GCL) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the TSX. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Colabor Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Colabor Group

What's the opportunity in Colabor Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.94% above my intrinsic value, which means if you buy Colabor Group today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth CA$0.98, there’s only an insignificant downside when the price falls to its real value. Furthermore, Colabor Group’s low beta implies that the stock is less volatile than the wider market.

What does the future of Colabor Group look like?

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 revenues expected to grow by a double-digit 25% over the next couple of years, the outlook is positive for Colabor Group. If the level of expenses is able to be maintained, 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? GCL’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 tabs on GCL, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

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. Every company has risks, and we've spotted 4 warning signs for Colabor Group (of which 1 is a bit concerning!) you should know about.

If you are no longer interested in Colabor 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. 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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