Is It Time To Consider Buying Zurn Elkay Water Solutions Corporation (NYSE:ZWS)?

While Zurn Elkay Water Solutions Corporation (NYSE:ZWS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$30.64 at one point, and dropping to the lows of US$25.37. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Zurn Elkay Water Solutions' current trading price of US$27.62 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Zurn Elkay Water Solutions’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Zurn Elkay Water Solutions

What's The Opportunity In Zurn Elkay Water Solutions?

According to my valuation model, Zurn Elkay Water Solutions seems to be fairly priced at around 15% below my intrinsic value, which means if you buy Zurn Elkay Water Solutions today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $32.62, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Zurn Elkay Water Solutions’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Zurn Elkay Water Solutions 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Zurn Elkay Water Solutions' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in ZWS’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ZWS, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Zurn Elkay Water Solutions as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Zurn Elkay Water Solutions and you'll want to know about them.

If you are no longer interested in Zurn Elkay Water Solutions, 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.