Capital First Limited (NSE:CAPF), a consumer finance company based in India, saw significant share price volatility over the past couple of months on the NSEI, rising to the highs of ₹665.1 and falling to the lows of ₹533.75. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Capital First’s current trading price of ₹559.9 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 Capital First’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 Capital First
What’s the opportunity in Capital First?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.23% above my intrinsic value, which means if you buy Capital First today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ₹547.7, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Capital First’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Capital First look like?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Capital First’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 CAPF’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 tabs on CAPF, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Capital First. You can find everything you need to know about Capital First in the latest infographic research report. If you are no longer interested in Capital First, you can use our free platform to see my list of over 50 other stocks with a high growth potential.