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At US$172, Is It Time To Put CRA International, Inc. (NASDAQ:CRAI) On Your Watch List?

editorial-team@simplywallst.com (Simply Wall St)
·3-min read

CRA International, Inc. (NASDAQ:CRAI), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The company is inching closer to its yearly highs following the recent share price climb. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine CRA International’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for CRA International

Is CRA International Still Cheap?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 27.66x is currently trading slightly above its industry peers’ ratio of 24.58x, which means if you buy CRA International today, you’d be paying a relatively sensible price for it. And if you believe that CRA International should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since CRA International’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of CRA International look like?

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

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. Though in the case of CRA International, it is expected to deliver a relatively unexciting earnings growth of 2.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for CRA International, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in CRAI’s growth outlook, with shares trading around industry price multiples. 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 CRAI? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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Are you a potential investor? If you’ve been keeping tabs on CRAI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 CRA International at this point in time. For example - CRA International has 1 warning sign we think you should be aware of.

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

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

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.

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