Badger Daylighting Ltd (TSE:BAD), a construction company based in Canada, received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$32.55 at one point, and dropping to the lows of CA$28.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Badger Daylighting's current trading price of CA$29.03 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 Badger Daylighting’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Badger Daylighting still cheap?Badger Daylighting appears to be overvalued by 24.5% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CA$29.03 on the market compared to my intrinsic value of CA$23.32. This means that the opportunity to buy Badger Daylighting at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Badger Daylighting’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Badger Daylighting 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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Badger Daylighting, it is expected to deliver a relatively unexciting earnings growth of 1.57%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Badger Daylighting, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in BAD’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe BAD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on BAD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors 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 Badger Daylighting. You can find everything you need to know about Badger Daylighting in the latest infographic research report. If you are no longer interested in Badger Daylighting, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.