Advertisement

When Should You Buy Covanta Holding Corporation (NYSE:CVA)?

Covanta Holding Corporation (NYSE:CVA), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$10.84 and falling to the lows of US$8.31. 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 Covanta Holding's current trading price of US$8.31 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 Covanta Holding’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 Covanta Holding

Is Covanta Holding still cheap?

Great news for investors – Covanta Holding is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $12.89, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Covanta Holding’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Covanta Holding?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With profit expected to grow by 83% over the next couple of years, the future seems bright for Covanta Holding. 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? Since CVA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on CVA for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CVA. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

If you want to dive deeper into Covanta Holding, you'd also look into what risks it is currently facing. Be aware that Covanta Holding is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...

If you are no longer interested in Covanta Holding, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.