Is Now An Opportune Moment To Examine Consolidated Communications Holdings, Inc. (NASDAQ:CNSL)?

While Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Consolidated Communications Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Consolidated Communications Holdings

Is Consolidated Communications Holdings still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 Consolidated Communications Holdings’s ratio of 10.35x is trading slightly below its industry peers’ ratio of 12.47x, which means if you buy Consolidated Communications Holdings today, you’d be paying a reasonable price for it. And if you believe that Consolidated Communications Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Consolidated Communications Holdings’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.

Can we expect growth from Consolidated Communications Holdings?

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. 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. However, with an expected decline of -2.0% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Consolidated Communications Holdings. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, CNSL appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in 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 CNSL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on CNSL for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 crystallize your views on CNSL should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 2 warning signs for Consolidated Communications Holdings (1 is significant!) and we strongly recommend you look at these before investing.

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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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