Conduent Incorporated (NASDAQ:CNDT), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$4.16 and falling to the lows of US$3.03. 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 Conduent's current trading price of US$3.08 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 Conduent'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 Conduent?
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. 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 Conduent's ratio of 22.74x is trading slightly below its industry peers' ratio of 26.24x, which means if you buy Conduent today, you'd be paying a decent price for it. And if you believe that Conduent should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Conduent'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 Conduent 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. With profit expected to more than double in the upcoming, the future appears to be extremely bright for Conduent. 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? CNDT's optimistic future growth appears to have been factored into the current share price, 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 CNDT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on CNDT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for CNDT, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Conduent as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 3 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in Conduent.
If you are no longer interested in Conduent, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
