At US$13.59, Is It Time To Put Costamare Inc. (NYSE:CMRE) On Your Watch List?

By
Simply Wall St
Published
February 25, 2022
NYSE:CMRE
Source: Shutterstock

Costamare Inc. (NYSE:CMRE), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. 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 Costamare’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Costamare

What is Costamare worth?

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 Costamare’s ratio of 6.22x is trading slightly above its industry peers’ ratio of 4.7x, which means if you buy Costamare today, you’d be paying a relatively sensible price for it. And if you believe that Costamare should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Costamare’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 Costamare?

earnings-and-revenue-growth
NYSE:CMRE Earnings and Revenue Growth February 25th 2022

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. With profit expected to more than double over the next couple of years, the future seems bright for Costamare. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? CMRE’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 CMRE? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on CMRE, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for CMRE, which means it’s worth further examining 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 Costamare at this point in time. For example, Costamare has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are no longer interested in Costamare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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