Is Apogee Enterprises, Inc. (NASDAQ:APOG) Potentially Undervalued?

July 21, 2022
  •  Updated
August 15, 2022
NasdaqGS:APOG
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Apogee Enterprises, Inc. (NASDAQ:APOG), is not the largest company out there, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Apogee Enterprises’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Apogee Enterprises

Is Apogee Enterprises still cheap?

Apogee Enterprises appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 58.37x is currently well-above the industry average of 16.74x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Apogee Enterprises’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Apogee Enterprises?

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NasdaqGS:APOG Earnings and Revenue Growth July 21st 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. In Apogee Enterprises' case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? APOG’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe APOG 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 APOG 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 outlook is encouraging for APOG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 4 warning signs with Apogee Enterprises, and understanding these should be part of your investment process.

If you are no longer interested in Apogee Enterprises, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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