Why CoreCivic, Inc. (NYSE:CXW) Could Be Worth Watching

CoreCivic, Inc. (NYSE:CXW), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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 CoreCivic’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for CoreCivic

What Is CoreCivic Worth?

According to my valuation model, CoreCivic seems to be fairly priced at around 4.9% below my intrinsic value, which means if you buy CoreCivic today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $11.12, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, CoreCivic’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from CoreCivic?

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. 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 negative earnings growth of -7.0%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, CXW appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CXW for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on CXW should the price fluctuate below its true value.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 2 warning signs for CoreCivic (1 can't be ignored!) that we believe deserve your full attention.

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.