Is CRA International, Inc. (NASDAQ:CRAI) Potentially Undervalued?

CRA International, Inc. (NASDAQ:CRAI), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at CRA International’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for CRA International

What's the opportunity in CRA International?

Good news, investors! CRA International is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 CRA International’s ratio of 19.21x is below its peer average of 28.08x, which indicates the stock is trading at a lower price compared to the Professional Services industry. What’s more interesting is that, CRA International’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 CRA International look like?

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. 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. With profit expected to grow by 27% over the next couple of years, the future seems bright for CRA International. 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? Since CRAI is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on CRAI for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CRAI. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you want to dive deeper into CRA International, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for CRA International and you'll want to know about this.

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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.
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