At kr159, Is CTT Systems AB (STO:CTT) Worth Looking At Closely?

CTT Systems AB (STO:CTT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the OM over the last few months. 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? Let’s take a look at CTT Systems’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for CTT Systems

What's the opportunity in CTT Systems?

According to my valuation model, the stock is currently overvalued by about 34%, trading at kr159 compared to my intrinsic value of SEK118.94. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since CTT Systems’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

What does the future of CTT Systems 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. With revenues expected to grow by 39% over the next couple of years, the future seems bright for CTT Systems. If the level of expenses is able to be maintained, 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 CTT’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CTT should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 an eye on CTT for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for CTT, 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 CTT Systems as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for CTT Systems (1 makes us a bit uncomfortable!) and we strongly recommend you look at these before investing.

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

When trading CTT Systems or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.