Stock Analysis

Is It Too Late To Consider Buying Primoris Services Corporation (NASDAQ:PRIM)?

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NasdaqGS:PRIM
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Primoris Services Corporation (NASDAQ:PRIM), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$41.12 and falling to the lows of US$30.10. 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 Primoris Services' current trading price of US$31.42 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Primoris Services’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Primoris Services

What's the opportunity in Primoris Services?

According to my valuation model, Primoris Services seems to be fairly priced at around 0.7% below my intrinsic value, which means if you buy Primoris Services today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $31.64, 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 Primoris Services’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 Primoris Services?

earnings-and-revenue-growth
NasdaqGS:PRIM Earnings and Revenue Growth May 25th 2021

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. 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 16% in the upcoming year, the short-term outlook is positive for Primoris Services. 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? PRIM’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 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 PRIM, now may not be the most advantageous 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with Primoris Services, and understanding them should be part of your investment process.

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What are the risks and opportunities for Primoris Services?

Primoris Services Corporation, a specialty contractor company, provides a range of construction, fabrication, maintenance, replacement, and engineering services in the United States and Canada.

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Rewards

  • Price-To-Earnings ratio (11.7x) is below the US market (14.9x)

  • Earnings are forecast to grow 12.8% per year

  • Earnings have grown 14.3% per year over the past 5 years

Risks

  • Debt is not well covered by operating cash flow

  • Significant insider selling over the past 3 months

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