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Chartwell Retirement Residences (TSE:CSH.UN), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$12.98 at one point, and dropping to the lows of CA$10.87. 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 Chartwell Retirement Residences' current trading price of CA$11.33 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Chartwell Retirement Residences’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Chartwell Retirement Residences still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.74% above my intrinsic value, which means if you buy Chartwell Retirement Residences today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$10.71, 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 Chartwell Retirement Residences’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 Chartwell Retirement Residences 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. Though in the case of Chartwell Retirement Residences, it is expected to deliver a relatively unexciting top-line growth of 9.6% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? CSH.UN’s 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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CSH.UN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 4 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in Chartwell Retirement Residences.
If you are no longer interested in Chartwell Retirement Residences, 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.