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Covenant Transportation Group, Inc. (NASDAQ:CVTI), which is in the transportation business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Covenant Transportation Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Covenant Transportation Group

What is Covenant Transportation Group worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16.38% above my intrinsic value, which means if you buy Covenant Transportation Group today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $12.68, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Covenant Transportation Group’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.

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What kind of growth will Covenant Transportation Group generate?

NasdaqGS:CVTI Past and Future Earnings, July 20th 2019
NasdaqGS:CVTI Past and Future Earnings, July 20th 2019

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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Covenant Transportation Group, at least in the near future.

What this means for you:

Are you a shareholder? CVTI seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CVTI for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on CVTI should the price fluctuate below its true value.

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Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Covenant Transportation Group. You can find everything you need to know about Covenant Transportation Group in the latest infographic research report. If you are no longer interested in Covenant Transportation Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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