While Costamare Inc. (NYSE:CMRE) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$15.82 at one point, and dropping to the lows of US$12.85. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Costamare's current trading price of US$13.31 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Costamare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Costamare

Is Costamare Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 4.46x is currently trading slightly above its industry peers’ ratio of 4.37x, which means if you buy Costamare today, you’d be paying a relatively reasonable price for it. And if you believe Costamare should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Costamare’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Costamare look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -7.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Costamare. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? CMRE seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on CMRE, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on CMRE for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on CMRE should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Costamare at this point in time. When we did our research, we found 4 warning signs for Costamare (1 is potentially serious!) that we believe deserve your full attention.

If you are no longer interested in Costamare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.