At US$167, Is It Time To Put Acuity Brands, Inc. (NYSE:AYI) On Your Watch List?

Acuity Brands, Inc. (NYSE:AYI), is not the largest company out there, but it maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of US$157 to US$170. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Acuity Brands’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 Acuity Brands

What Is Acuity Brands Worth?

Great news for investors – Acuity Brands is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $230.90, but it is currently trading at US$167 on the share market, meaning that there is still an opportunity to buy now. However, given that Acuity Brands’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Acuity Brands 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -3.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Acuity Brands. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although AYI is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to AYI, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on AYI for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

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 Acuity Brands has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Acuity Brands, 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.