Conn’s, Inc. (NASDAQ: CONN), a consumer discretionary company with a market capitalization of $1.1 billion, saw its share price increase by 36.9% over the last month. As a small-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 shares still be trading at a relatively cheap price? Let’s take a look at CONN’s outlook and value based on its most recent financial data to see if there are any catalysts for a price change.
What Is CONN Worth?
Welcoming news for investors, CONN is still trading at a fairly cheap price. According to our 6 valuation analyses, the intrinsic value for the stock is $43.82 per share and is currently trading at $36.25 in the market. This means that there is still an opportunity to buy now.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$55.20||52.3%|
|5-yr DCF Revenue Exit||$49.42||36.3%|
|Peer Revenue Multiples||$45.21||24.7%|
|Peer EBITDA Multiples||$46.36||27.9%|
|Peer P/E Multiples||$21.90||-39.6%|
|Earnings Power Value||$44.84||23.7%|
Click on any of the analyses above to view the latest model with real-time data.
CONN’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta of 0.41. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
How Much Growth Will CONN 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.
source: finbox.io data explorer
With net income expected to grow at an average rate of 79.2% over the next couple years, the future certainly appears bright for CONN. It looks like higher cash flows are in the cards for shareholders, which should feed into a higher stock valuation.
While many investors tend to categorize stocks as either value or growth plays, the most successful investors view growth in conjunction with a company’s value. Take legendary investor Peter Lynch for example, who is widely known for popularizing the term growth at a reasonable price (GARP).
GARP is a strategy that combines aspects of both growth and value investing techniques by finding high growth companies that don’t trade at overly high valuations. In the application of this strategy, Lynch achieved 29% annualized returns as the manager of Fidelity’s Magellan Fund from 1977 to 1990. Needless to say the importance of analyzing a company’s fair value in addition to its growth prospects.
CONN’s optimistic future growth does not appear to have been fully factored into the current share price with the stock still trading below its intrinsic value. Therefore, it may be a good time to purchase shares or increase your position in the company.
However, if you have not done so already, I highly recommend you complete your research on CONN by taking a look at the following:
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.
Risk Metrics: how is CONN’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.
Valuation Metrics: how much upside do shares of CONN 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.
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.