Is There Now An Opportunity In Owens Corning (NYSE:OC)?

Owens Corning (NYSE:OC), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. 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 examine Owens Corning’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Our analysis indicates that OC is potentially undervalued!

What's The Opportunity In Owens Corning?

Good news, investors! Owens Corning is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Owens Corning’s ratio of 7.29x is below its peer average of 14.74x, which indicates the stock is trading at a lower price compared to the Building industry. However, given that Owens Corning’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 does the future of Owens Corning look like?

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. However, with a negative profit growth of -9.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Owens Corning. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although OC is currently trading below the industry PE ratio, the negative profit 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 OC, 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 OC for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Owens Corning, you'd also look into what risks it is currently facing. Be aware that Owens Corning is showing 4 warning signs in our investment analysis and 1 of those can't be ignored...

If you are no longer interested in Owens Corning, 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.