In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Tucows Inc. (NASDAQ:TCX), which is in the it business, and is based in Canada, received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to $89.12 at one point, and dropping to the lows of $57.88. 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 Tucows's current trading price of $60.29 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 Tucows’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Tucows
Is Tucows still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’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 39.53x is currently trading slightly above its industry peers’ ratio of 35.73x, which means if you buy Tucows today, you’d be paying a relatively reasonable price for it. And if you believe that Tucows should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Tucows’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.
What kind of growth will Tucows 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. 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. Tucows’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? TCX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 TCX? Will you have enough confidence to invest in the company should the price drop below its fair value?