Should You Investigate Cancom SE (ETR:COK) At €53.84?

Cancom SE (ETR:COK), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Cancom’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Cancom

What's the opportunity in Cancom?

Cancom appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €53.84 on the market compared to my intrinsic value of €44.53. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Cancom’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Cancom look like?

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. 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 -2.9% 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? If you believe COK is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on COK for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Cancom has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.

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.