At US$126, Is It Time To Put Advanced Drainage Systems, Inc. (NYSE:WMS) On Your Watch List?

While Advanced Drainage Systems, Inc. (NYSE:WMS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Advanced Drainage Systems’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Advanced Drainage Systems

What's The Opportunity In Advanced Drainage Systems?

According to my valuation model, the stock is currently overvalued by about 32%, trading at US$126 compared to my intrinsic value of $95.28. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Advanced Drainage Systems’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 Advanced Drainage Systems?

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. Advanced Drainage Systems' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? WMS’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe WMS 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 WMS 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 is encouraging for WMS, which means it’s worth diving deeper into other factors 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. At Simply Wall St, we found 2 warning signs for Advanced Drainage Systems and we think they deserve your attention.

If you are no longer interested in Advanced Drainage Systems, 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.