Stock Analysis

What Is Finning International Inc.'s (TSE:FTT) Share Price Doing?

TSX:FTT
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While Finning International Inc. (TSE:FTT) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the TSX, rising to highs of CA$29.74 and falling to the lows of CA$23.78. 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 Finning International's current trading price of CA$24.83 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the 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 there are any catalysts for a price change.

Check out the opportunities and risks within the CA Trade Distributors industry.

What Is Finning International Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.05x is currently trading slightly above its industry peers’ ratio of 6.2x, which means if you buy Finning International today, you’d be paying a relatively reasonable price for it. And if you believe that Finning International should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Finning International’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Finning International look like?

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TSX:FTT Earnings and Revenue Growth October 12th 2022

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. With profit expected to grow by a double-digit 11% in the upcoming year, the short-term outlook is positive for Finning International. 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? It seems like the market has already priced in FTT’s positive outlook, with shares trading around industry price multiples. 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 FTT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on FTT, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FTT, which 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.

If you want to dive deeper into Finning International, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for Finning International (1 is a bit concerning!) that we believe deserve your full attention.

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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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.