Many investors really think it is inflated or overpriced. I am not in clear state to defend CMG's current price or price trend, but I would consider that as emotional bias of investors. Except Berkshire Hathway, all companies trading above $300 face the same problem. Why? These price range belongs to a tiny set of companies from a set of thousands of companies currently being traded. Isn't this bias obvious? I think it is. But let's keep behavioral finance aside and focus on fundamentals. Based on my valuation model (based on $439.07 closing price of 10/17/2013), CMG is still undervalued! Below are the few points which may help make my case:
- Consistently decreasing debt/ equity ratio considering the fact that they have been pretty much at the same place in terms of raising capital through equity.
- Skyrocketing growth in revenues and net income (Needless to write!!)
- Impressive ROE year over year
- Robust growth in operating cash flow
- Free cash flow per share and EPS forecasts are way higher beyond the peers
- Based on all above, company financials, consensus estimates and other relevant market data, I am getting a fundamental stock price range of $612 to $701.
All I believe is that CMG may not be magnificently undervalued, but it is not overvalued for sure considering all numbers and forecasts.