- Paper and Forestry Products
What Is Canfor Pulp Products Inc.'s (TSE:CFX) Share Price Doing?
While Canfor Pulp Products Inc. (TSE:CFX) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the TSX over the last few months. Less-covered, small caps sees 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? Today I will analyse the most recent data on Canfor Pulp Products’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Canfor Pulp Products
What is Canfor Pulp Products worth?
Canfor Pulp Products is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 29.5x is currently well-above the industry average of 5.79x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Canfor Pulp Products’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 Canfor Pulp Products 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. Canfor Pulp Products' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in CFX’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CFX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 CFX for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CFX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Canfor Pulp Products at this point in time. For example - Canfor Pulp Products has 1 warning sign we think you should be aware of.
If you are no longer interested in Canfor Pulp Products, 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.
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Canfor Pulp Products
Canfor Pulp Products Inc., together with its subsidiaries, engages in the production and supply of pulp and paper products in Canada, Europe, Asia, the United States, and internationally.
Adequate balance sheet and fair value.