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Beacon Roofing Supply, Inc. (NASDAQ:BECN), which is in the trade distributors business, and is based in United States, received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Beacon Roofing Supply’s outlook and valuation to see if the opportunity still exists.
What’s the opportunity in Beacon Roofing Supply?According to my valuation model, Beacon Roofing Supply seems to be fairly priced at around 10% below my intrinsic value, which means if you buy Beacon Roofing Supply today, you’d be paying a fair price for it. And if you believe that the stock is really worth $41.72, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Beacon Roofing Supply’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.
Can we expect growth from Beacon Roofing Supply?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. 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 revenue growth of 8.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Beacon Roofing Supply, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in BECN’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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on BECN, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Beacon Roofing Supply. You can find everything you need to know about Beacon Roofing Supply in the latest infographic research report. If you are no longer interested in Beacon Roofing Supply, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.