Federal Signal Corporation (NYSE:FSS), which is in the machinery business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Federal Signal’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Federal Signal
What’s the opportunity in Federal Signal?
Good news, investors! Federal Signal is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $38.48, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Federal Signal’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Federal Signal?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 relatively muted profit growth of 3.9% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Federal Signal, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since FSS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on FSS for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FSS. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Federal Signal. You can find everything you need to know about Federal Signal in the latest infographic research report. If you are no longer interested in Federal Signal, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.