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While CoreCivic, Inc. (NYSE:CXW) might not have the largest market cap around , it saw a decent share price growth of 13% on the NYSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine CoreCivic’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for CoreCivic
What's The Opportunity In CoreCivic?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that CoreCivic’s ratio of 32.18x is trading slightly above its industry peers’ ratio of 30.44x, which means if you buy CoreCivic today, you’d be paying a relatively sensible price for it. And if you believe that CoreCivic should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because CoreCivic’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from CoreCivic?
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. CoreCivic's earnings over the next few years are expected to increase by 81%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in CXW’s positive outlook, 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 CXW? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?