What Does CoreCivic, Inc.'s (NYSE:CXW) Share Price Indicate?

CoreCivic, Inc. (NYSE:CXW), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. 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 CoreCivic’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for CoreCivic

Is CoreCivic still cheap?

Great news for investors – CoreCivic is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.06x is currently well-below the industry average of 22.42x, meaning that it is trading at a cheaper price relative to its peers. CoreCivic’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will CoreCivic generate?

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. Though in the case of CoreCivic, it is expected to deliver a relatively unexciting earnings growth of 1.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for CoreCivic, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since CXW is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. 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 CXW for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CXW. 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, CoreCivic has 3 warning signs (and 1 which is potentially serious) we think you should know about.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.