What Does Armstrong World Industries, Inc.'s (NYSE:AWI) Share Price Indicate?

While Armstrong World Industries, Inc. (NYSE:AWI) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$90.66 and falling to the lows of US$72.58. 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$75.14 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.

See our latest analysis for Armstrong World Industries

What's The Opportunity In Armstrong World Industries?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 0.02% below my intrinsic value, which means if you buy Armstrong World Industries today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $75.15, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Armstrong World Industries’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

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 38% 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on AWI, 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 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. Case in point: We've spotted 1 warning sign for Armstrong World Industries you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.