Coherent, Inc. (NASDAQ:COHR), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Coherent’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Coherent?
Good news, investors! Coherent is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $197.56, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Coherent’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 Coherent generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In the upcoming year, Coherent's earnings are expected to increase by 96%, 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? Since COHR is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on COHR for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy COHR. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
So while earnings quality is important, it's equally important to consider the risks facing Coherent at this point in time. Case in point: We've spotted 2 warning signs for Coherent you should be mindful of and 1 of these is concerning.
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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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