Why Clearwater Paper Corporation (NYSE:CLW) Could Be Worth Watching

By
Simply Wall St
Published
November 06, 2021
NYSE:CLW
Source: Shutterstock

While Clearwater Paper Corporation (NYSE:CLW) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NYSE. 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 examine Clearwater Paper’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Clearwater Paper

What is Clearwater Paper worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.40% above my intrinsic value, which means if you buy Clearwater Paper today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $35.60, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Clearwater Paper’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Clearwater Paper generate?

earnings-and-revenue-growth
NYSE:CLW Earnings and Revenue Growth November 7th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 revenues expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Clearwater Paper. If the level of expenses is able to be maintained, 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? CLW’s optimistic future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on CLW, 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 the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing Clearwater Paper at this point in time. For instance, we've identified 3 warning signs for Clearwater Paper (2 shouldn't be ignored) you should be familiar with.

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

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