Why Dycom Industries, Inc. (NYSE:DY) Could Be Worth Watching

By
Simply Wall St
Published
April 10, 2022
NYSE:DY
Source: Shutterstock

Dycom Industries, Inc. (NYSE:DY), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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, what if the stock is still a bargain? Today I will analyse the most recent data on Dycom Industries’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Dycom Industries

What's the opportunity in Dycom Industries?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.1% below my intrinsic value, which means if you buy Dycom Industries today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $94.22, 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 Dycom 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.

Can we expect growth from Dycom Industries?

earnings-and-revenue-growth
NYSE:DY Earnings and Revenue Growth April 10th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Dycom 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? 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on DY, now may not be the most optimal 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Dycom Industries, and understanding this should be part of your investment process.

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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