Is There Now An Opportunity In Coda Octopus Group, Inc. (NASDAQ:CODA)?

Coda Octopus Group, Inc. (NASDAQ:CODA), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQCM. As a small cap stock, hardly covered by any analysts, 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 Coda Octopus Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Coda Octopus Group

What's the opportunity in Coda Octopus Group?

Coda Octopus Group appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Coda Octopus Group’s ratio of 31.2x is above its peer average of 25.5x, which suggests the stock is trading at a higher price compared to the Electronic industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Coda Octopus Group’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 does the future of Coda Octopus Group look like?

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. In the upcoming year, Coda Octopus Group's earnings are expected to increase by 84%, 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? CODA’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CODA should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on CODA for some time, 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 optimistic prospect is encouraging for CODA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Coda Octopus Group as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Coda Octopus Group and we think they deserve your attention.

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This article by Simply Wall St is general in nature. 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.
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