Is Concentrix (CNXC) Pricing Look Misaligned After Prolonged Share Price Weakness?

• If you are wondering whether Concentrix at around US$39.04 is a bargain or a value trap, this article will walk through what the current price might be telling you about the stock.
• The share price has moved 4.6% over the last 7 days, while returns sit at an 11.4% decline over 30 days, a 5.3% decline year to date, a 16.1% decline over 1 year, a 71.2% decline over 3 years, and a 62.0% decline over 5 years, which may change how investors think about its risk and potential.
• Recent coverage around Concentrix has focused on its role in customer experience and outsourced services, along with how the business is positioned within the broader commercial services sector. This context helps frame why the market may be reassessing what it is willing to pay for the stock today.
• Simply Wall St currently assigns Concentrix a valuation score of 5/6, which we will break down across different valuation methods next, before finishing with a way of looking at valuation that goes beyond the usual numbers.

Find out why Concentrix's -16.1% return over the last year is lagging behind its peers.

Approach 1: Concentrix Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash the company is expected to generate in the future and discounts it back into today’s dollars, to arrive at an estimate of what the business might be worth right now.

For Concentrix, the model uses a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is about $565.1 million. Analysts have provided cash flow estimates for the next few years, and Simply Wall St then extends those forecasts, with projected free cash flow of $1,025.7 million by 2030. All of these future cash flows, including the ten year projection range, are discounted back to today and summed.

On this basis, the DCF model arrives at an estimated intrinsic value of about $185.66 per share. Compared with the recent share price of about $39.04, the model suggests the stock trades at roughly a 79.0% discount to that estimate, which points to a wide gap between the market price and the cash flow based valuation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Concentrix is undervalued by 79.0%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Concentrix.

Approach 2: Concentrix Price vs Sales

For a profitable services company like Concentrix, revenue-based metrics such as the Price to Sales (P/S) ratio can be a useful cross-check on the DCF because they link the share price directly to the scale of the business being done with customers.

In general, the multiple investors are willing to pay tends to be higher when they expect stronger growth and see lower risk, and lower when growth expectations are modest or risks feel higher. That is why a single “normal” P/S ratio does not fit every company.

Concentrix currently trades on a P/S ratio of 0.24x. This sits below the Professional Services industry average of 1.08x and also below the peer group average of 2.02x. Simply Wall St’s proprietary Fair Ratio for Concentrix is 1.15x, which reflects a blend of factors such as its earnings growth profile, profit margins, industry, market value and risk characteristics.

The Fair Ratio is designed to be more tailored than a simple comparison with peers or the broad industry because it adjusts for company-specific traits instead of assuming one size fits all. Comparing Concentrix’s current 0.24x P/S to the 1.15x Fair Ratio suggests the shares trade below that model-based reference point.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Concentrix Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you write your own story for Concentrix by setting assumptions for future revenue, earnings and margins. You can then link that story to a forecast and a fair value, and compare that fair value with today’s price. The whole Narrative updates as new news or earnings arrive. This means one investor might build a bullish Concentrix Narrative around a fair value of US$80.00, while another uses a more cautious Narrative with fair value at US$54.00. This gives you a clear, numbers backed view of how different viewpoints translate into different decisions.

Do you think there's more to the story for Concentrix? Head over to our Community to see what others are saying!

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.

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