CoreCivic (CXW) Valuation Check As Special Use Permit Clears Path For Detainee Intake Resumption

CoreCivic (CXW) shares are reacting to the company securing a Special Use Permit for its 1,033 bed Midwest Regional Reception Center in Leavenworth, Kansas, which clears the way to resume detainee intake in the coming weeks.

See our latest analysis for CoreCivic.

At a share price of $18.21, CoreCivic has a 1 day share price return of 3.23% following the permit news. Its year to date share price return of 4.26% and 1 year total shareholder return decline of 10.38% contrast with very large total shareholder returns over three and five years, suggesting longer term holders have seen strong compounding even as recent momentum has softened.

If this regulatory update has you thinking about where else capital might flow in future, it could be a good moment to look at 24 power grid technology and infrastructure stocks as another way to research infrastructure related opportunities.

With CoreCivic trading at $18.21 against an analyst price target of $30.25 and recent returns softening after very large multi year gains, is the stock still underappreciated, or is the market already pricing in future growth?

Preferred P/E of 15.3x: Is it justified?

At a last close of $18.21, CoreCivic is trading on a P/E of 15.3x, which screens as good value when you stack it against both peers and the wider US market.

The P/E ratio compares what you pay today with the company’s earnings, so for a business like CoreCivic, which is profitable and already generating cash, it is a straightforward way to see how the market prices those earnings.

Here, CoreCivic’s P/E of 15.3x sits below the US market at 18.4x, the US Commercial Services industry at 22.6x, and a peer average of 29.3x. This suggests the market is valuing each dollar of CoreCivic’s earnings more conservatively than it does for comparable companies. Against an estimated fair P/E of 23.5x, that gap is even wider, pointing to a level that the market could potentially move toward if earnings and forecasts remain on track.

Explore the SWS fair ratio for CoreCivic

Result: Price-to-earnings of 15.3x (UNDERVALUED)

However, recent 30 day and year to date share price declines, along with CoreCivic’s exposure to government contracts and regulatory decisions, could still challenge this valuation case.

Find out about the key risks to this CoreCivic narrative.

Another View: Our DCF Model Sees Less Upside

While the P/E of 15.3x points to good value against peers and the wider US market, our DCF model tells a different story. On that basis, CoreCivic at $18.21 is trading above an estimated future cash flow value of $13.18, which frames the shares as overvalued on this method. So which signal do you put more weight on?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CoreCivic for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 48 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals across valuation methods and sentiment, it makes sense to look at the full picture yourself and determine where you stand. Start with 5 key rewards and 1 important warning sign to weigh both concerns and potential upsides in one place.

Looking for more investment ideas?

If CoreCivic has sharpened your focus on valuation and risk, do not stop here. Broaden your watchlist now or you could miss other compelling setups.

• Target value first and see which companies currently screen as 48 high quality undervalued stocks with solid earnings backing up their prices.
• Prioritise resilience and check out 68 resilient stocks with low risk scores that score well on risk metrics and business stability.
• Hunt for future standouts using our screener containing 26 high quality undiscovered gems before they move onto everyone else's radar.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com