What Does Cargojet Inc.'s (TSE:CJT) Share Price Indicate?

Cargojet Inc. (TSE:CJT), 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$113 and falling to the lows of CA$92.14. 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 Cargojet's current trading price of CA$101 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 Cargojet’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 Cargojet

Is Cargojet Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 11.78x is currently trading slightly below its industry peers’ ratio of 13.17x, which means if you buy Cargojet today, you’d be paying a reasonable price for it. And if you believe that Cargojet should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Cargojet’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Cargojet 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. However, with a negative profit growth of -17% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Cargojet. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, CJT 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 de-risk 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 CJT, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CJT for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 CJT 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. In terms of investment risks, we've identified 3 warning signs with Cargojet, and understanding them should be part of your investment process.

If you are no longer interested in Cargojet, 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.