Today we’re going to take a look at the well-established CDW Corporation (NASDAQ:CDW). The company’s stock saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$219 and falling to the lows of US$197. 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$215 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.
Check out our latest analysis for CDW
Is CDW Still Cheap?
CDW appears to be expensive according to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.33x is currently well-above the industry average of 18.73x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from CDW?
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. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for CDW. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
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 above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CDW should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 CDW for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CDW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. For example, we’ve discovered 1 warning sign that you should run your eye over to get a better picture of CDW.
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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Find out whether CDW is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
