Burcon NutraScience Corporation (TSE:BU), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$1.66 at one point, and dropping to the lows of CA$1.01. 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 Burcon NutraScience's current trading price of CA$1.01 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 Burcon NutraScience’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Burcon NutraScience still cheap?
Burcon NutraScience appears to be overvalued by 37% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CA$1.01 on the market compared to my intrinsic value of CA$0.74. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Burcon NutraScience’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Burcon NutraScience 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. 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. Burcon NutraScience's earnings over the next few years are expected to increase by 69%, 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? BU’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 BU 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 an eye on BU for a while, 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 optimistic prospect is encouraging for BU, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Burcon NutraScience, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Burcon NutraScience (1 doesn't sit too well with us!) that we believe deserve your full attention.
If you are no longer interested in Burcon NutraScience, 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.