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Is Finning International Inc. (TSE:FTT) Potentially Undervalued?
Finning International Inc. (TSE:FTT), might not be a large cap stock, but it led the TSX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Finning International’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Finning International
Is Finning International Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.46% above my intrinsic value, which means if you buy Finning International today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is CA$32.37, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Finning International’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 kind of growth will Finning International generate?
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. However, with a relatively muted profit growth of 4.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Finning International, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in FTT’s future outlook, 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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on FTT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Finning International at this point in time. For example, we've found that Finning International has 2 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Finning International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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Find out whether Finning International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.
Finning International Inc. sells, services, and rents heavy equipment, engines, and related products in Canada, Chile, Bolivia, the United Kingdom, Argentina, Ireland, and internationally.
Very undervalued with outstanding track record and pays a dividend.