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CRSR – Mid term value and growth play with great upside and little downside

I've seen a few other CRSR DD's here lately and wanted to add my own. Corsair likely needs little introduction these days, as their computer components find their way into a huge and increasing number of PC builds. Fans, radiators, keyboards, etc. Their products are great and the way the company is managed is just as good.

There is unfortunately not much long term data available on the company, as they only recently went public with an IPO in September 2020, when it debuted at $15 a share. However I will do my best to analyze all the data about the company since then to prove Corsair has a great valuation as it currently sits at ~$32 a share.

As the above link states, Corsair had a revenue of 1.3 Billion ending in June 2020. Even through the first waves of the pandemic, with closures of factories everywhere, Corsair still managed to rake in cash, which they continue to do so. Using TD Ameritrade's platform thinkorswim, we can see revenue has still been growing since then, massively too.

Financials

TDA's Fundamentals on CRSR

There's alot to take in right there, but lets analyze their fundamentals.

  • Revenue growth was estimated at 65.75%. For a company to see that much revenue growth during a time that production facilities across the world are shutting down is nothing short of amazing. And that's not all for growth during Covid.
  • Earnings Per Share in the last twelve months is at $1.59, pretty good. What's even better is that this is a 108% increase in the EPS of last year.
  • Book Value Per Share rose similarly, with a yearly increase of 50.39%, bringing it up to $4.76 BVPS.
  • Gross and Net Profit Margins saw in increases of 30.76% and 112.62%, respectively.
  • At the same time, the Debt to Capital ratio dropped through the floor, falling 65.03% to strengthen the company's balance sheet.
  • Financial Leverage decreased by 62.71%, showing their effort in paying off loans on assets.

As for valuation, Corsair's P/E ratio, the most well known valuation ratio, is at 19.606. Relatively high, but most value investors consider a P/E below 20 to be the range for a decent value stock. On the other hand, P/C and P/B are at 21.299 and 6.2857, higher than desired for value stock considerations. While the P/C and P/B can be used as a counterargument to my thesis, I am willing to overlook these numbers because Corsair's massive growth during a global pandemic highlights that this company can be considered undervalued and a growth stock candidate.

Additionally, Corsair has nearly doubled expected earnings in 2 of the last three quarters. The numbers are as follows:

  • Q3, 2020: Expected earnings of .26, actual was .52
  • Q4, 2020: Expected earnings of .56, actual was .52
  • Q1, 2021: Expected earnings of .34, actual was .56

This indicates Corsair's consistent results, with analysts underestimating the company's potential.

Now, lets look at a chart of CRSR.

Previous 12 Months

Flat as a pancake

Now, I'm not personally one for technical analysis. I won't go in depth here, but anyone can see that in the last several months, the stock price has barely moved. down from a high of $51.37 per share in November 2020, it has settled at a stable ~$32 per share, rarely deviating more than a dollar in either direction. Part of this is because of the low volume in recent months. Since March 2021, volume has never gone below 500,000 and never above 4.8 million, with the 4.8 milllion figure being a significant outlier. In the past, Corsair has seen much stronger buy volume and can rise in price quickly, going from its IPO price of $15 in September 2020 to its ATH of $51.37 only two months later.

Why is this important? A stable stock price means low Implied Volatility. Low Implied Volatility means cheap options. IV is currently at 56.7%, and any increase in stock price above its resistance of $33 will see an increase in the price of all options. ATM weeklies can be as cheap as a $.37 premium per share for calls. LEAPS aren't terribly expensive either, although open interest on long term options is currently low.

Looking Forward

All this already sounds like a great investment, but as I previously mentioned multiple times, these numbers put up by Corsair were all during the Covid pandemic and it's factory shutdowns. As anyone who has tried to build a PC recently will know, semiconductor prices are through the roof currently because of low supply. GPU and CPU production is extremely slow right now, but just starting to pick up steam. Over the past year, scalpers have strangled the computer chip market and alot of people are straight up refusing to pay for these inflated prices. Once production is back in full force and consumers are building more PC's, peripheral sales will spike alongside them. This is where Corsair comes in. If they can put up spectacular growth numbers while a large part of the market sits and waits for prices on critical components goes down, think about what will happen when new AMD chips and NVIDIA graphics cards are being pumped out at breakneck paces, which will soon happen as vaccines are now allowing non essential businesses to ramp up production once again. Most analysts place the price target around $50, showing its strong upside.

Conclusion

Corsair is currently showing signs of both a good value investment and growth stock. They demonstrate a decent P/E ratio and increases in EPS, BVPS, revenue, and profit margin, alongside decreases in Debt to Capital ratio and Financial Leverage. The stock price is currently very steady at ~$32 a share, resulting in low IV and cheap options. As the semiconductor market warms back up as Covid subsides, Corsair sales will increase even more as more people build PC's with Corsair cases, mouses, power supplies, etc.

Current Positions: 30 shares at $33.73, 20 Aug 21 35C. I plan on buying more shares and options.

This is not financial advice. Do your own research.

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