Should You Investigate GATX Corporation (NYSE:GATX) At US$153?

GATX Corporation (NYSE:GATX), is not the largest company out there, but it saw a decent share price growth of 19% on the NYSE over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a US$5.4b market cap stock, it seems odd GATX is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at GATX’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for GATX

Is GATX Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that GATX’s ratio of 20.22x is trading slightly above its industry peers’ ratio of 17.11x, which means if you buy GATX today, you’d be paying a relatively reasonable price for it. And if you believe GATX should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like GATX’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of GATX look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 15% over the next couple of years, the outlook is positive for GATX. 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? GATX’s optimistic future growth appears to have been factored into the current share price, 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 GATX? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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

If you'd like to know more about GATX as a business, it's important to be aware of any risks it's facing. Be aware that GATX is showing 3 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

If you are no longer interested in GATX, 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.