Is It Time To Consider Buying Cancom SE (ETR:COK)?

Cancom SE (ETR:COK), is not the largest company out there, but it led the XTRA gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Cancom’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Cancom

What is Cancom worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13.91% above my intrinsic value, which means if you buy Cancom today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €52.29, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Cancom’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.

Can we expect growth from Cancom?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -7.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Cancom. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, COK appears to be trading around its fair value, 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 the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on COK for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which 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 crystalize your views on COK should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Cancom at this point in time. Case in point: We've spotted 2 warning signs for Cancom you should be aware of.

If you are no longer interested in Cancom, 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.