Capstone Turbine Corporation (NASDAQ:CPST), a electrical company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqCM. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Capstone Turbine’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for Capstone Turbine
What is Capstone Turbine worth?According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Capstone Turbine’s ratio of 3.31x is trading slightly above its industry peers’ ratio of 1.53x, which means if you buy Capstone Turbine today, you’d be paying a relatively fair price for it. And if you believe that Capstone Turbine should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Capstone Turbine’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Capstone Turbine 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. Capstone Turbine’s earnings over the next few years are expected to increase by 82.95%, indicating a highly optimistic future ahead. This should lead to more 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 CPST’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 CPST? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on CPST, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CPST, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Capstone Turbine. You can find everything you need to know about Capstone Turbine in the latest infographic research report. If you are no longer interested in Capstone Turbine, you can use our free platform to see my list of over 50 other stocks with a high growth potential.