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Is There Now An Opportunity In Extendicare Inc. (TSE:EXE)?

While Extendicare Inc. (TSE:EXE) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$6.77 and falling to the lows of CA$6.10. 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 Extendicare's current trading price of CA$6.10 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Extendicare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Extendicare

What Is Extendicare Worth?

Great news for investors – Extendicare is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is CA$10.10, but it is currently trading at CA$6.10 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Extendicare’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Extendicare look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. However, with a relatively muted revenue growth of 4.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Extendicare, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since EXE is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

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Are you a potential investor? If you’ve been keeping an eye on EXE for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EXE. 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 buy.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with Extendicare, and understanding these should be part of your investment process.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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