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CSG Systems International, Inc. (NASDAQ:CSGS), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$65.73 at one point, and dropping to the lows of US$55.03. 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 CSG Systems International's current trading price of US$56.90 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 CSG Systems International’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 CSG Systems International
What Is CSG Systems International Worth?
CSG Systems International appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that CSG Systems International’s ratio of 39.13x is above its peer average of 28.5x, which suggests the stock is trading at a higher price compared to the IT industry. In addition to this, it seems like CSG Systems International’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will CSG Systems International generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for CSG Systems International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in CSGS’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CSGS should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.