Is It Time To Consider Buying FirstService Corporation (TSE:FSV)?

FirstService Corporation (TSE:FSV), might not be a large cap stock, but it saw a decent share price growth in the teens level on the TSX over the last few months. 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 take a look at FirstService’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for FirstService

Is FirstService Still Cheap?

FirstService is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 56.87x is currently well-above the industry average of 9.13x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that FirstService’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from FirstService?

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. However, with a relatively muted profit growth of 4.4% expected over the next year, growth doesn’t seem like a key driver for a buy decision for FirstService, at least in the short term.

What This Means For You

Are you a shareholder? FSV’s future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe FSV should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on FSV for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, FirstService has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are no longer interested in FirstService, 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.