Should You Think About Buying Armstrong World Industries, Inc. (NYSE:AWI) Now?

Armstrong World Industries, Inc. (NYSE:AWI), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$82.73 at one point, and dropping to the lows of US$65.46. 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 Armstrong World Industries' current trading price of US$65.46 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Armstrong World Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Armstrong World Industries

Is Armstrong World Industries Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Armstrong World Industries’s ratio of 14.58x is trading in-line with its industry peers’ ratio, which means if you buy Armstrong World Industries today, you’d be paying a relatively sensible price for it. 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.

What kind of growth will Armstrong World Industries generate?

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 12% over the next couple of years, the outlook is positive 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? It seems like the market has already priced in AWI’s positive outlook, with shares trading around industry price multiples. 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 AWI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on AWI, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for AWI, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Armstrong World Industries has 1 warning sign and it would be unwise to ignore this.

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.