Stock Analysis

Is Now The Time To Look At Buying Primoris Services Corporation (NASDAQ:PRIM)?

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NasdaqGS:PRIM
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Primoris Services Corporation (NASDAQ:PRIM), is not the largest company out there, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$24.15 and falling to the lows of US$17.66. 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$17.66 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.

See our latest analysis for Primoris Services

Is Primoris Services Still Cheap?

Good news, investors! Primoris Services is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Primoris Services’s ratio of 7.71x is below its peer average of 25.26x, which indicates the stock is trading at a lower price compared to the Construction industry. Although, there may be another chance to buy again in the future. This is because Primoris Services’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Primoris Services generate?

earnings-and-revenue-growth
NasdaqGS:PRIM Earnings and Revenue Growth September 24th 2022

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. Primoris Services' earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since PRIM is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on PRIM for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PRIM. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Primoris Services at this point in time. For instance, we've identified 2 warning signs for Primoris Services (1 shouldn't be ignored) you should be familiar with.

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

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 (11.5x) is below the US market (15.5x)

  • 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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