Time To Buy Carpenter Technology Corporation (NYSE: CRS)?


Carpenter Technology Corporation (NYSE: CRS) investors have enjoyed seeing the stock price increase by 21.1% over the last month. As a mid-cap stock with decent coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at the company’s expected growth and valuation based on its most recent financial data to see if there is further upside moving forward.

What’s The Opportunity In Carpenter Technology?

Carpenter Technology appears to be overvalued by -15.7% at the moment, based on 11 separate valuation models. The stock is currently trading at $56.20 on the market compared to our average intrinsic value of $47.35. This means that the buying opportunity has probably disappeared for now.

Carpenter Technology Corporation Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF Revenue Exit $42.01 -25.2%
5-yr DCF Revenue Exit $44.25 -21.3%
Peer Revenue Multiples $44.78 -20.3%
10-yr DCF EBITDA Exit $59.05 5.1%
5-yr DCF EBITDA Exit $70.25 25.0%
Peer EBITDA Multiples $52.23 -7.1%
10-yr DCF Growth Exit $35.53 -36.8%
5-yr DCF Growth Exit $34.35 -38.9%
Peer P/E Multiples $56.55 0.6%
Dividend Discount Model $37.66 -33.0%
Dividend Discount Model (multi-stage) $44.20 -21.4%
Average $47.35 -15.7%

Click on any of the analyses above to view the latest model with real-time data.

However, will there be another opportunity to buy low in the future? Given that Carpenter Technology’s stock is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) could mean the price can sink lower, giving investors another chance to buy in the future. This is based on its beta of 1.83, which is a good indicator for share price volatility.

Can We Expect Growth From Carpenter Technology?

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 matters the most, a more compelling investment thesis would be high growth potential at a cheap price.

Carpenter Technology projected net income chartsource: finbox.io data explorer

With net income expected to grow at an average rate of 40.2% over the next couple years, the future certainly appears bright for Carpenter Technology. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.

What This Means For Investors

Growth investors typically look to invest in companies that are expanding sales, gaining market share and building customer bases. On the other hand, value investors often argue that the most successful investments are in companies that deliver the highest cash flows while trading at the lowest valuation.

But why not put those hands together? A company that has both growth and value characteristics would certainly make the most attractive investment. So what did we find out about Carpenter Technology?

Carpenter Technology has positioned itself so that double-digit growth appears to be a reasonable assumption for the foreseeable future. However, this growth does not look highly attractive at current trading levels. As such, investors may want to hold off on buying or adding to their CRS position for the time being.

It is important to note that there are a variety of other fundamental factors that I have not taken into consideration in this article. If you have not done so already, I highly recommend that you complete your research on Carpenter Technology by taking a look at the following:

Valuation Metrics: how much upside do shares of Carpenter Technology have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.

Risk Metrics: how is Carpenter Technology’s financial health? Find out by viewing our financial leverage data metric which plots the dollars in total assets for each dollar of common equity over time.

Efficiency Metrics: is management becoming more or less efficient over time? Find out by analyzing the company’s asset turnover ratio which measures the dollars in revenue a company generates per dollar of assets.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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