Is It Time To Consider Buying Advanced Drainage Systems, Inc. (NYSE:WMS)?

Today we're going to take a look at the well-established Advanced Drainage Systems, Inc. (NYSE:WMS). The company's stock saw a decent share price growth of 12% on the NYSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-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 examine Advanced Drainage Systems’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Advanced Drainage Systems

What Is Advanced Drainage Systems Worth?

According to our valuation model, Advanced Drainage Systems seems to be fairly priced at around 0.7% below our intrinsic value, which means if you buy Advanced Drainage Systems today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $157.35, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Advanced Drainage Systems’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Advanced Drainage Systems 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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Advanced Drainage Systems. 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? WMS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on WMS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Advanced Drainage Systems, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Advanced Drainage Systems, and understanding it should be part of your investment process.

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.