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

Advanced Drainage Systems, Inc. (NYSE:WMS), is not the largest company out there, but it received a lot of attention from a substantial price increase 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? Today I will analyse the most recent data on Advanced Drainage Systems’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Advanced Drainage Systems

What Is Advanced Drainage Systems Worth?

Advanced Drainage Systems appears to be overvalued by 22% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$96.55 on the market compared to my intrinsic value of $79.06. Not the best news for investors looking to buy! But, is there another opportunity to buy low 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.

What kind of growth will Advanced Drainage Systems generate?

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? It seems like the market has well and truly priced in WMS’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to 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 optimistic prospect is encouraging for WMS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Advanced Drainage Systems as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Advanced Drainage Systems has 2 warning signs and it would be unwise to ignore these.

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.