While Carter's, Inc. (NYSE:CRI) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$85.24 at one point, and dropping to the lows of US$69.30. 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 Carter's' current trading price of US$70.67 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Carter's’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 Carter's?
Carter's appears to be overvalued by 31% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$70.67 on the market compared to my intrinsic value of $54.12. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Carter's’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Carter's 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. However, with a negative profit growth of -9.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Carter's. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? If you believe CRI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on CRI for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
If you want to dive deeper into Carter's, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Carter's (2 shouldn't be ignored) you should be familiar with.
If you are no longer interested in Carter's, 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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