Today we’re going to take a look at the well-established First Data Corporation (NYSE:FDC). The company’s stock saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $17.71 and falling to the lows of $14.99. 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 First Data’s current trading price of $15.28 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at First Data’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 First Data
Is First Data still cheap?According to my valuation model, First Data seems to be fairly priced at around 9% above my intrinsic value, which means if you buy First Data today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $14.05, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because First Data’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 First Data 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. However, with a negative profit growth of -12.76% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for First Data. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, FDC 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 FDC 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. In addition to this, 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 crystalize your views on FDC should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Data. You can find everything you need to know about First Data in the latest infographic research report. If you are no longer interested in First Data, you can use our free platform to see my list of over 50 other stocks with a high growth potential.