Is Compagnie Financière Richemont SA (VTX:CFR) Potentially Undervalued?

Today we're going to take a look at the well-established Compagnie Financière Richemont SA (VTX:CFR). The company's stock led the SWX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Compagnie Financière Richemont’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Compagnie Financière Richemont

What's The Opportunity In Compagnie Financière Richemont?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy Compagnie Financière Richemont today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CHF137.13, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Compagnie Financière Richemont’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Compagnie Financière Richemont?

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. With profit expected to grow by 85% over the next couple of years, the future seems bright for Compagnie Financière Richemont. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in CFR’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on CFR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Compagnie Financière Richemont at this point in time. In terms of investment risks, we've identified 1 warning sign with Compagnie Financière Richemont, and understanding it should be part of your investment process.

If you are no longer interested in Compagnie Financière Richemont, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.