What Does Cargotec Corporation's (HEL:CGCBV) Share Price Indicate?

By
Simply Wall St
Published
January 28, 2021
HLSE:CGCBV

While Cargotec Corporation (HEL:CGCBV) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the HLSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Cargotec’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Cargotec

What is Cargotec worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.5% below my intrinsic value, which means if you buy Cargotec today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €36.14, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Cargotec’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Cargotec generate?

earnings-and-revenue-growth
HLSE:CGCBV Earnings and Revenue Growth January 29th 2021

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. Cargotec's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CGCBV’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 financial strength of the company. 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 CGCBV, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 4 warning signs for Cargotec and we think they deserve your attention.

If you are no longer interested in Cargotec, 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. 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.
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