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Transcontinental Inc. (TSE:TCL.A), is not the largest company out there, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$18.82 at one point, and dropping to the lows of CA$16.42. 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 Transcontinental's current trading price of CA$17.72 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 Transcontinental’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Transcontinental?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.09x is currently trading slightly below its industry peers’ ratio of 9.71x, which means if you buy Transcontinental today, you’d be paying a decent price for it. And if you believe Transcontinental should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, Transcontinental’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Check out our latest analysis for Transcontinental
What kind of growth will Transcontinental 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. However, with a relatively muted profit growth of 3.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Transcontinental, at least in the short term.