Bridgepoint Education Inc (NYSE:BPI), a consumer services company based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $9.88 and falling to the lows of $7.6. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Bridgepoint Education’s current trading price of $8.21 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bridgepoint Education’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Bridgepoint Education
Is Bridgepoint Education still cheap?Bridgepoint Education appears to be overvalued according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 123.48x is currently well-above the industry average of 23.63x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Bridgepoint Education’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Bridgepoint Education generate?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. With profit expected to more than double over the next couple of years, the future seems bright for Bridgepoint Education. It looks like higher cash flows 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 Bridgepoint Education’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Bridgepoint Education 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 Bridgepoint Education for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for Bridgepoint Education, which means it’s worth diving deeper into other factors 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 Bridgepoint Education. You can find everything you need to know about Bridgepoint Education in the latest infographic research report. If you are no longer interested in Bridgepoint Education, you can use our free platform to see my list of over 50 other stocks with a high growth potential.