Is There Now An Opportunity In Corus Entertainment Inc. (TSE:CJR.B)?

Corus Entertainment Inc. (TSE:CJR.B), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$6.36 and falling to the lows of CA$5.66. 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 Corus Entertainment's current trading price of CA$6.00 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 Corus Entertainment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Corus Entertainment

What is Corus Entertainment worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 6.84x is currently trading slightly below its industry peers’ ratio of 11.49x, which means if you buy Corus Entertainment today, you’d be paying a decent price for it. And if you believe Corus Entertainment should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Corus Entertainment’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of Corus Entertainment look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -7.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Corus Entertainment. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, CJR.B appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CJR.B, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CJR.B for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This 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 crystallize your views on CJR.B should the price fluctuate below the industry PE ratio.

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. When we did our research, we found 3 warning signs for Corus Entertainment (1 doesn't sit too well with us!) that we believe deserve your full attention.

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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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