Is There Now An Opportunity In Indigo Books & Music Inc (TSE:IDG)?
Indigo Books & Music Inc (TSE:IDG), a specialty retail company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of CA$19.95 and falling to the lows of CA$17.3. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Indigo Books & Music’s current trading price of CA$17.3 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Indigo Books & Music’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Indigo Books & Music
Is Indigo Books & Music still cheap?
Indigo Books & Music appears to be overvalued by 44.98% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CA$17.30 on the market compared to my intrinsic value of CA$11.93. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Indigo Books & Music’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Indigo Books & Music?
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. Though in the case of Indigo Books & Music, it is expected to deliver a relatively unexciting top-line growth of 8.88% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? IDG’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IDG 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. 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 tabs on IDG for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Indigo Books & Music. You can find everything you need to know about Indigo Books & Music in the latest infographic research report. If you are no longer interested in Indigo Books & Music, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
