Is CHEGG Stock a Bargain? Find Out Now!

Is CHEGG Stock a Bargain? Find Out Now!

Table of Contents:

1. Introduction
2. Overview of the Check Stock
3. Financial Risks and Highlights
4. Four-Step Stock Screening Process 4.1 Basic Fundamentals 4.2 Debt Management 4.3 Momentum 4.4 Historical Growth
5. Valuations 5.1 Price to Free Cash Flow 5.2 Earnings per Share on Discounted Cash Flow Model
6. My Personal Price Projections
7. Conclusion
8. Frequently Asked Questions (FAQs)

Introduction

The check stock has recently experienced a significant drop in its price, reaching its lowest point in the past four years. This downfall came after the earnings forecast was drastically reduced. Despite a brief rally in February, the stock is still down by 72% in the last year. This article aims to provide an in-depth analysis of the check stock, including its overview, financial risks, screening process, valuations, and personal price projections. By examining these aspects, investors can make informed decisions about whether to invest in this stock.

Overview of the Check Stock

To understand the Current state of the check stock, it is essential to examine its key fundamentals. The enterprise value stands at 3.3 billion, with a market cap of 3.1 billion. Insiders hold 2.09% of the stock, while institutional holding is currently at 106%. However, it is crucial to note that the accuracy of this figure may be skewed due to a delay in updates or excessive short selling among investors. Short interest currently stands at 6.37. The net free cash flow is 168.6 million, indicating the company's financial standing. While the stock experienced Record lows, only five out of 11 analysts believe it is currently a buy. The average price Consensus among analysts who view it as a buy is 41.78.

Financial Risks and Highlights

Before considering an investment in the check stock, it is important to be aware of the associated financial risks and highlights. On the positive side, earnings are forecasted to grow by 51% per year, and over the last five years, earnings have grown by an average of 11.9% per year. However, there are concerns about the stock being overvalued, as its price to book ratio is 2.9 compared to the U.S. consumer services industry average of 1.3. These factors should be taken into account when assessing the stock's potential risks and rewards.

Four-Step Stock Screening Process

When evaluating a stock, it is essential to have a systematic approach. This four-step stock screening process ensures that key fundamentals are considered.

4.1 Basic Fundamentals

The first step is to assess the basic fundamentals of the check stock. The price to earnings (P/E) ratio should ideally be between 1 and 25. Currently, the forward P/E ratio is 20.79. The net margin, indicating profitability, should be greater than 10. However, the check stock is currently reporting negative margin for the trailing 12 months. Net equity, which represents the company's worth per share, stands at 808.5 million.

4.2 Debt Management

Debt management is a critical factor to consider when evaluating a stock. The debt to equity ratio should be below 40, but the check stock has a high ratio of 209.27. On the other HAND, the current ratio, indicating liquidity, is 8.02. The free cash flow to debt ratio should ideally pay down at least 10% of the debt. Unfortunately, the check stock falls just short with a ratio of 9.28.

4.3 Momentum

Examining momentum over a three-year period is vital to identify trends in revenue growth. The check stock shows consistent growth in total revenue, gross profit, net income, operating cash flow, and free cash flow over the past three years. However, the operating income has been slightly inconsistent in the trailing 12 months.

4.4 Historical Growth

Historical growth rates provide insights into the stock's performance. The return on equity and return on asset should ideally be greater than 10, but the check stock falls short on these benchmarks with negative 0.17 and 2.02 respectively. The return on invested capital is 2.89, also falling short on the 10 benchmark. Additionally, the compound annual growth rate of earnings per share should be at least 10%, but the check stock struggles in this area as well.

Valuations

Determining the value of a stock is crucial for making investment decisions. The check stock will be evaluated using two valuation models: the price to free cash flow and the earnings per share on a discounted cash flow (DCF) model.

5.1 Price to Free Cash Flow

The current multiple for the price to free cash flow is 18.59. Based on intrinsic valuation, the check stock is estimated to be valued at 20.21 using a range of 15 to 25.

5.2 Earnings per Share on Discounted Cash Flow Model

Applying a discounted cash flow model with a discount rate of 10%, a growth projection range of 5% to 15%, and a fair target P/E of 12, the intrinsic valuation for the check stock based on earnings per share is 20.07.

My Personal Price Projections

Taking into consideration the evaluations conducted, my personal price projection for the check stock over the next 12 months is 19.50, with a potential margin of 14%. If looking to buy the stock, a target price below 16.58 is recommended. However, it is important to note that this analysis is based purely on the fundamentals, and other factors need to be considered before making an investment decision.

Conclusion

In conclusion, the check stock has experienced a significant decline in its price, reaching its lowest point in the past four years. While there are positive factors such as forecasted earnings growth, there are concerns about the stock being overvalued. The four-step stock screening process analyzed the basic fundamentals, debt management, momentum, and historical growth. Valuations were conducted using the price to free cash flow and earnings per share on a DCF model. Based on personal projections, the stock is deemed worthy of further analysis and consideration. However, additional research and examination of forward-facing factors are necessary before making an investment decision.

Frequently Asked Questions (FAQs)

Q: Is the check stock a good buy? A: Only five out of 11 analysts currently believe the stock is a buy. It is important to conduct thorough research and consider various factors before making an investment decision.

Q: What are the financial risks associated with investing in the check stock? A: The stock is considered to be overvalued based on its price to book ratio. Additionally, there are concerns about the company's negative net margin and inconsistent historical growth rates.

Q: What is the current valuation of the check stock? A: The check stock is currently trading at a price to free cash flow multiple of 18.59. Intrinsic valuations range from 20.07 to 20.21 based on different models.

Q: What are the highlights of the check stock's financials? A: Earnings are forecasted to grow at a significant rate, and earnings have shown consistent growth over the past five years. However, caution should be exercised due to the stock's overvalued status.

Q: What is the personal price projection for the check stock? A: Based on personal analysis, the projected price for the check stock over the next 12 months is 19.50, with a potential margin of 14%. A target price below 16.58 is recommended for buying.