Let's talk about the popular CDW Corporation (NASDAQ:CDW). The company's shares saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$229 and falling to the lows of US$174. 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 CDW's current trading price of US$177 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at CDW's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is CDW Worth?
The stock seems fairly valued at the moment according to our valuation model. It's trading around 11% below our intrinsic value, which means if you buy CDW today, you'd be paying a fair price for it. And if you believe the company's true value is $197.96, then there's not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that CDW'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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will CDW generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. CDW's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? CDW's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping tabs on CDW, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.
So while earnings quality is important, it's equally important to consider the risks facing CDW at this point in time. You'd be interested to know, that we found 1 warning sign for CDW and you'll want to know about it.
If you are no longer interested in CDW, 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.
