Why Chartwell Retirement Residences (TSE:CSH.UN) Could Be Worth Watching

While Chartwell Retirement Residences (TSE:CSH.UN) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$9.60 and falling to the lows of CA$8.22. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Chartwell Retirement Residences' current trading price of CA$8.85 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Chartwell Retirement Residences’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Chartwell Retirement Residences

Is Chartwell Retirement Residences Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.5% below my intrinsic value, which means if you buy Chartwell Retirement Residences today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$8.99, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Chartwell Retirement Residences’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 kind of growth will Chartwell Retirement Residences generate?

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. Though in the case of Chartwell Retirement Residences, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, CSH.UN 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 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 tabs on CSH.UN for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears 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 CSH.UN should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 4 warning signs for Chartwell Retirement Residences (3 make us uncomfortable) you should be familiar with.

If you are no longer interested in Chartwell Retirement Residences, 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.