Is There Now An Opportunity In Stella-Jones Inc. (TSE:SJ)?

Stella-Jones Inc. (TSE:SJ), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the TSX. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Stella-Jones’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Stella-Jones

What Is Stella-Jones Worth?

According to my valuation model, Stella-Jones seems to be fairly priced at around 14% below my intrinsic value, which means if you buy Stella-Jones today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CA$57.13, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Stella-Jones’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Stella-Jones generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Stella-Jones. 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? SJ’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 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 an eye on SJ, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

If you'd like to know more about Stella-Jones as a business, it's important to be aware of any risks it's facing. For example - Stella-Jones has 1 warning sign we think you should be aware of.

If you are no longer interested in Stella-Jones, 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.