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Front Yard Residential Corporation (NYSE:RESI), which is in the reits business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Front Yard Residential’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Front Yard Residential worth?
According to my valuation model, Front Yard Residential seems to be fairly priced at around 13.95% above my intrinsic value, which means if you buy Front Yard Residential today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $10, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Front Yard Residential’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Front Yard Residential 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. With profit expected to grow by 45% over the next couple of years, the future seems bright for Front Yard Residential. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? RESI’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on RESI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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 Front Yard Residential. You can find everything you need to know about Front Yard Residential in the latest infographic research report. If you are no longer interested in Front Yard Residential, 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 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. Thank you for reading.