Today we’re going to take a look at the well-established Power Financial Corporation (TSE:PWF). The company’s stock received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$30.45 at one point, and dropping to the lows of CA$26.15. 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 Power Financial’s current trading price of CA$26.24 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Power Financial’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in Power Financial?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19% below my intrinsic value, which means if you buy Power Financial today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$32.5, then there’s not much of an upside to gain from mispricing. What’s more, Power Financial’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Power Financial?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 profit expected to grow by 37% over the next couple of years, the future seems bright for Power Financial. 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? PWF’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 PWF, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Power Financial. You can find everything you need to know about Power Financial in the latest infographic research report. If you are no longer interested in Power Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.