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At US$6.18, Is It Time To Put CompoSecure, Inc. (NASDAQ:CMPO) On Your Watch List?

CompoSecure, Inc. (NASDAQ:CMPO), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine CompoSecure’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for CompoSecure

What's The Opportunity In CompoSecure?

According to my valuation model, CompoSecure seems to be fairly priced at around 18% below my intrinsic value, which means if you buy CompoSecure today, you’d be paying a fair price for it. And if you believe that the stock is really worth $7.51, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, CompoSecure’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from CompoSecure?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 revenues expected to grow by 39% over the next couple of years, the future seems bright for CompoSecure. If the level of expenses is able to be maintained, 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 already priced in CMPO’s positive outlook, 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on CMPO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 want to dive deeper into CompoSecure, you'd also look into what risks it is currently facing. Be aware that CompoSecure is showing 2 warning signs in our investment analysis and 1 of those is significant...

If you are no longer interested in CompoSecure, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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