At UK£34.10, Is Clarkson PLC (LON:CKN) Worth Looking At Closely?

By
Simply Wall St
Published
January 25, 2022
LSE:CKN
Source: Shutterstock

While Clarkson PLC (LON:CKN) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the LSE, rising to highs of UK£41.80 and falling to the lows of UK£34.10. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Clarkson's current trading price of UK£34.10 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Clarkson’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Clarkson

What's the opportunity in Clarkson?

According to my valuation model, Clarkson seems to be fairly priced at around 7.5% below my intrinsic value, which means if you buy Clarkson today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £36.88, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Clarkson’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 Clarkson?

earnings-and-revenue-growth
LSE:CKN Earnings and Revenue Growth January 25th 2022

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. Clarkson's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust 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 CKN’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 track record of its management team. 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 an eye on CKN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

If you'd like to know more about Clarkson as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Clarkson and we think they deserve your attention.

If you are no longer interested in Clarkson, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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