Is Now The Time To Look At Buying Compagnie des Alpes SA (EPA:CDA)?

While Compagnie des Alpes SA (EPA:CDA) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the ENXTPA over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Compagnie des Alpes’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Compagnie des Alpes

What Is Compagnie des Alpes Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Compagnie des Alpes’s ratio of 6.06x is trading slightly below its industry peers’ ratio of 9.16x, which means if you buy Compagnie des Alpes today, you’d be paying a reasonable price for it. And if you believe Compagnie des Alpes should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Compagnie des Alpes’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 does the future of Compagnie des Alpes look like?

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. However, with a negative profit growth of -16% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Compagnie des Alpes. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? CDA seems priced close to industry peers right now, 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 CDA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CDA for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 crystallize your views on CDA should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Compagnie des Alpes at this point in time. For example - Compagnie des Alpes has 1 warning sign we think you should be aware of.

If you are no longer interested in Compagnie des Alpes, 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.