Is Karooooo (USA Stocks:KARO) volatility expected to decline even more is November?
 | By Vlad Skutelnik | Macroaxis Story |
Karooooo (NASDAQ: KARO), a prominent player in the software service industry, has been experiencing a decline in volatility, which is expected to continue into November. This trend could potentially present a lucrative investment opportunity. The company, with a market valuation of $21.89 billion, has a real value of $25.75 billion, indicating a potential upside. Analysts have an overall consensus of 'Buy' on the stock, with one 'Buy', two 'Strong Buys', and one 'Hold'. The average estimated target price stands at $29.33, with the highest estimate reaching $34 and the lowest at $24. This suggests a possible upside price of $26.8 and a downside risk of $21.33. The naive expected forecast value for Karooooo is $24.07. With the fiscal year ending in February, investors are closely monitoring the company's performance. Only 23% of stocks are less volatile than Karooooo, and 99% of all traded equity instruments are projected to yield higher returns than the company over a 60-day investment horizon. As many traditional traders are attempting to steer clear of the software sector, it makes sense to delve deeper into Karooooo and try to comprehend its current volatility patterns. We will assess whether Karooooo's current volatility will persist into November.
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Reviewed by Rifka Kats
Karooooo currently holds approximately 1000 million in cash, with 1.13 billion of positive cash flow from operations. This results in a cash-per-share (CPS) ratio of 32.35, which could make it an attractive takeover target, assuming it continues to generate positive cash flow.
Advanced assessment of Karooooo
Investors who prioritize volatility in their investment strategies may find the current trends in Karooooo (USA Stocks: KARO) intriguing. Over the past few months, Karooooo has demonstrated a significant decrease in volatility, with a standard deviation of 2.68 and variance of 7.18, hinting at more stable returns for investors. This declining volatility trend is expected to continue into November, potentially providing a lucrative investment opportunity. However, investors should also consider the Treynor Ratio of -0.06, which indicates a loss of 0.06 for every unit of risk taken. Additionally, the software application company has shown a negative Jensen Alpha of 0.06, suggesting that the stock has underperformed in relation to its expected return. Despite these potential red flags, the decreasing volatility combined with a potential upside of 5.51 may still make Karooooo an attractive investment for those who can tolerate some level of risk. Volatility is a rate at which the price of Karooooo or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Karooooo may increase or decrease. In other words, similar to Karooooo's beta indicator, it measures the risk of Karooooo and helps estimate the fluctuations that may happen in a short period of time. So if prices of Karooooo fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.
How important is Karooooo's Liquidity
Karooooo financial leverage refers to using borrowed capital as a funding source to finance Karooooo ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Karooooo financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Karooooo's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Karooooo's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Karooooo's total debt and its cash.
Karooooo Gross Profit
Karooooo Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Karooooo previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Karooooo Gross Profit growth over the last 10 years. Please check Karooooo's gross profit and other fundamental indicators for more details.
Karooooo Volatility Drivers
Karooooo unsystematic risk is unique to Karooooo and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Karooooo you can also buy Meridianlink. You can also mitigate this risk by investing in the information technology sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Karooooo important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Karooooo income statement and balance sheet. Here are more details about Karooooo volatility.Click cells to compare fundamentals
A Deeper Perspective
Karooooo reported the previous year's revenue of 3.51 B. Net Income was 597.15 M with profit before overhead, payroll, taxes, and interest of 2.27 B. Karooooo (USA Stocks: KARO), a leading player in the Software - Application industry, has been experiencing a significant decrease in volatility. The company's Value At Risk stands at -4.23, indicating a potential further decline in volatility. Despite this, Karooooo's financial strength remains robust, with a healthy cash flow from operations of 1.13 billion and a working capital of 673.33 million. Karooooo's fiscal year, which ends in February, saw a revenue generation of 3.51 billion, yielding a profit margin of 0.16%.With a net income of 597.15 million, Karooooo has demonstrated its ability to generate consistent earnings. The company's Return On Equity stands at 0.26, suggesting a good level of profitability. Investors should also consider Karooooo's robust balance sheet, with cash and equivalents amounting to 1 billion and a current ratio of 1.45X, indicating the firm's ability to meet short-term liabilities. Additionally, the company's shares are largely held by insiders, at 74.85%, which could be seen as a vote of confidence in the company's future prospects. Despite the anticipated further decline in volatility, Karooooo, with a market capitalization of 650.28 million, presents a potentially lucrative investment opportunity. It's worth noting that the company has a potential upside of 5.51, suggesting that the stock could still offer substantial gains. .
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