This post was originally published on this site.
Fairfax Financial Holdings (TSX:FFH) has quietly pulled back about 3% over the past week, even though the stock is still up roughly 17% year to date. This sets up an interesting entry question.
See our latest analysis for Fairfax Financial Holdings.
That recent 7 day share price return of negative 3.53 percent comes after a strong year to date share price gain of 17.36 percent. The five year total shareholder return of 462.49 percent shows the longer term uptrend is still very much intact, even if short term momentum is cooling.
If Fairfax’s pullback has you thinking about what else could rerate higher, now is a good time to explore fast growing stocks with high insider ownership.
With Fairfax now trading below analyst targets but still boasting hefty multi year returns, investors face a key question: is this a rare value gap in a quality compounder, or has the market already priced in its future growth?
With Fairfax Financial Holdings last closing at CA$2321.37 and the most followed narrative pointing to value closer to CA$2707.92, the spread demands a closer look at the assumptions behind that gap.
The analysts have a consensus price target of CA$2634.296 for Fairfax Financial Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$2990.19, and the most bearish reporting a price target of just CA$1649.1.
Want to know why modest revenue growth, shrinking margins and a richer future earnings multiple still add up to upside from here? The real surprise lies in how these moving parts, when discounted at a relatively low rate, combine into a valuation that sits well above today’s share price. Curious which assumptions carry the most weight in that calculation, and how much optimism they really embed?
Result: Fair Value of $2707.92 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, Fairfax’s earnings story could still surprise on the upside if investment income stays structurally higher and underwriting profitability remains consistently strong.
Find out about the key risks to this Fairfax Financial Holdings narrative.
If you want to stress test these assumptions yourself or lean on your own due diligence, you can build a fresh narrative in under three minutes: Do it your way.
A great starting point for your Fairfax Financial Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
Do not stop at Fairfax; use the Simply Wall St Screener to uncover fresh opportunities that fit your strategy before other investors catch on.
-
Secure potential growth at sensible prices by targeting companies flagged as undervalued through these 906 undervalued stocks based on cash flows that may offer a better balance of risk and reward.
-
Capitalize on powerful secular trends in automation and machine learning by focusing on these 26 AI penny stocks poised to benefit from accelerating demand for intelligent software and infrastructure.
-
Strengthen your income stream by finding reliable payers and potential yield upgrades using 3%;elm:context_link;itc:0;sec:content-canvas” class=”link “>these 15 dividend stocks with yields > 3% tailored to investors who want consistent cash returns.
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.
Companies discussed in this article include FFH.TO.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com