Is It Too Late To Consider Buying Indigo Books & Music Inc. (TSE:IDG)?

While Indigo Books & Music Inc. (TSE:IDG) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the TSX over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Indigo Books & Music’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Indigo Books & Music

What is Indigo Books & Music worth?

Good news, investors! Indigo Books & Music is still a bargain right now. My valuation model shows that the intrinsic value for the stock is CA$5.99, but it is currently trading at CA$3.90 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Indigo Books & Music’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Indigo Books & Music?

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. Though in the case of Indigo Books & Music, it is expected to deliver a relatively unexciting top-line growth of 7.0% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since IDG is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on IDG for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy IDG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for Indigo Books & Music (1 is a bit unpleasant!) and we strongly recommend you look at these before investing.

If you are no longer interested in Indigo Books & Music, 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.