A Fresh Valuation Look at Resideo Technologies (REZI) After Standout Q2 Results and Upgraded Outlook

Resideo Technologies (NYSE:REZI) just delivered a Q2 performance that turned heads in the building materials space. By exceeding the high end of its own guidance on core metrics, such as organic revenue growth and gross margin, and then raising its outlook for the year, Resideo set a new bar for its peers. That surprise to the upside is grabbing the attention of investors who may have underestimated the company’s ability to execute, especially after it achieved the biggest earnings beat and fastest revenue growth among its competitors this quarter.

This surge in performance was quickly reflected in the stock, which has climbed 55% since the results were announced. That move caps off a solid one-year run with the stock more than doubling, and momentum clearly shifting upward over the past three months as well. Beyond just price gains, analysts have responded to Resideo's impressive numbers by revising earnings estimates higher, reflecting a brighter outlook across the industry, even as investor sentiment remains mindful of last year’s slower periods.

With the market seemingly re-rating Resideo’s growth potential, the question arises: are investors now looking at a genuine value opportunity, or is the recent rally fully pricing in the company’s improved prospects?

Most Popular Narrative: 40% Undervalued

According to the most closely watched narrative, Resideo Technologies is currently valued at a significant discount to its estimated fair value.

"The planned separation of the ADI segment and portfolio optimization are set to sharpen strategic focus and resource allocation. This enables both entities to better address evolving industry needs and unlock potential value, with positive implications for operating leverage, margin profile, and long-term earnings power."

Curious what makes analysts so bullish on Resideo's future? The answer lies in bold financial projections, aggressive margin targets, and an expected profitability turnaround. Want to see which specific assumptions are making this story a must-watch for growth and value investors alike? There is a quantitative blueprint at work here that even seasoned market-watchers might find surprising.

Result: Fair Value of $41.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, intensified competition from Big Tech, along with heavy reliance on legacy products, could quickly dampen analyst enthusiasm and challenge Resideo’s growth story.

Find out about the key risks to this Resideo Technologies narrative.

Another View: What Does Our DCF Model Suggest?

While the analyst consensus paints a fair value picture based on revenue and earnings assumptions, our SWS DCF model offers a different perspective. It also indicates that Resideo is undervalued. Does this method confirm or complicate the bullish case?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Resideo Technologies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Resideo Technologies Narrative

If you see Resideo's story differently or would rather dig into the numbers on your own terms, you can build your own take in just a few minutes. Do it your way

A great starting point for your Resideo Technologies research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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