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Cairn Homes plc (LON:CRN), is not the largest company out there, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on Cairn Homes’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Cairn Homes
What Is Cairn Homes Worth?
The stock is currently trading at UK£1.82 on the share market, which means it is overvalued by 36% compared to our intrinsic value of £1.34. This means that the opportunity to buy Cairn Homes at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Cairn Homes’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
Can we expect growth from Cairn Homes?
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. Cairn Homes' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? CRN’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe CRN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CRN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for CRN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.