Is There Now An Opportunity In Granite Construction Incorporated (NYSE:GVA)?

Granite Construction Incorporated (NYSE:GVA), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$42.45 and falling to the lows of US$36.62. 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 Granite Construction's current trading price of US$39.22 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Granite Construction’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 Granite Construction

Is Granite Construction still cheap?

According to my valuation model, the stock is currently overvalued by about 22%, trading at US$39.22 compared to my intrinsic value of $32.02. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Since Granite Construction’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Granite Construction?

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. Though in the case of Granite Construction, it is expected to deliver a relatively unexciting top-line growth of 9.0% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in GVA’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe GVA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on GVA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors 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 Granite Construction at this point in time. You'd be interested to know, that we found 1 warning sign for Granite Construction and you'll want to know about it.

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This article by Simply Wall St is general in nature. 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.
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