At US$153, Is It Time To Put Armstrong World Industries, Inc. (NYSE:AWI) On Your Watch List?

Armstrong World Industries, Inc. (NYSE:AWI), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. 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. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Armstrong World Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Armstrong World Industries

What Is Armstrong World Industries Worth?

According to our valuation model, Armstrong World Industries seems to be fairly priced at around 8.3% below our intrinsic value, which means if you buy Armstrong World Industries today, you’d be paying a fair price for it. And if you believe that the stock is really worth $167.18, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Armstrong World Industries’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.

Can we expect growth from Armstrong World Industries?

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. With profit expected to grow by 26% over the next couple of years, the future seems bright for Armstrong World Industries. 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? AWI’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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AWI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which 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.

So while earnings quality is important, it's equally important to consider the risks facing Armstrong World Industries at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Armstrong World Industries.

If you are no longer interested in Armstrong World Industries, 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.