Is Now The Time To Look At Buying cBrain A/S (CPH:CBRAIN)?

cBrain A/S (CPH:CBRAIN), might not be a large cap stock, but it saw a significant share price rise of 25% in the past couple of months on the CPSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Today we will analyse the most recent data on cBrain’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for cBrain

What Is cBrain Worth?

cBrain appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that cBrain’s ratio of 75.56x is above its peer average of 33.48x, which suggests the stock is trading at a higher price compared to the Software industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that cBrain’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.

Can we expect growth from cBrain?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 75% over the next couple of years, the future seems bright for cBrain. 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 well and truly priced in CBRAIN’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe CBRAIN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. 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 CBRAIN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CBRAIN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about cBrain as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for cBrain (1 is potentially serious) you should be familiar with.

If you are no longer interested in cBrain, 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.