Let’s talk about the popular AmerisourceBergen Corporation (NYSE:ABC). The company’s shares saw significant share price movement during recent months on the NYSE, rising to highs of US$92.03 and falling to the lows of US$83.15. 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 AmerisourceBergen’s current trading price of US$85.56 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at AmerisourceBergen’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in AmerisourceBergen?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that AmerisourceBergen’s ratio of 21.02x is trading slightly below its industry peers’ ratio of 22.86x, which means if you buy AmerisourceBergen today, you’d be paying a reasonable price for it. And if you believe AmerisourceBergen should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, it seems like AmerisourceBergen’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from AmerisourceBergen?
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. AmerisourceBergen’s earnings over the next few years are expected to increase by 92%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? ABC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ABC? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on ABC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for ABC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on AmerisourceBergen. You can find everything you need to know about AmerisourceBergen in the latest infographic research report. If you are no longer interested in AmerisourceBergen, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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. Thank you for reading.