Why CDW Corporation (NASDAQ:CDW) Could Be Worth Watching

Let's talk about the popular CDW Corporation (NASDAQ:CDW). The company's shares received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$258 at one point, and dropping to the lows of US$215. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether CDW's current trading price of US$228 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 CDW’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for CDW

Is CDW Still Cheap?

According to our valuation model, CDW seems to be fairly priced at around 0.34% above our intrinsic value, which means if you buy CDW today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $227.46, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that CDW’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will CDW 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. CDW's earnings over the next few years are expected to increase by 26%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CDW’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CDW, now may not be the most advantageous 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 CDW at this point in time. You'd be interested to know, that we found 1 warning sign for CDW and you'll want to know about this.

If you are no longer interested in CDW, 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.