Is Dycom Industries, Inc. (NYSE:DY) Potentially Undervalued?

Dycom Industries, Inc. (NYSE:DY), is not the largest company out there, but it saw a decent share price growth of 16% on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. 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 Dycom Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Dycom Industries

What Is Dycom Industries Worth?

According to our valuation model, Dycom Industries seems to be fairly priced at around 4.59% above our intrinsic value, which means if you buy Dycom Industries today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $186.45, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Dycom 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 Dycom Industries?

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. Dycom Industries' earnings over the next few years are expected to increase by 72%, 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? DY’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 DY, 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 further examining 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 Dycom Industries at this point in time. While conducting our analysis, we found that Dycom Industries has 2 warning signs and it would be unwise to ignore these.

If you are no longer interested in Dycom 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.