Stock Analysis

At US$46.61, Is VSE Corporation (NASDAQ:VSEC) Worth Looking At Closely?

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NasdaqGS:VSEC
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While VSE Corporation (NASDAQ:VSEC) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on VSE’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for VSE

What's the opportunity in VSE?

VSE is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that VSE’s ratio of 65.41x is above its peer average of 25.99x, which suggests the stock is trading at a higher price compared to the Commercial Services industry. But, is there another opportunity to buy low in the future? Given that VSE’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will VSE generate?

earnings-and-revenue-growth
NasdaqGS:VSEC Earnings and Revenue Growth April 29th 2022

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. In VSE's case, its earnings over the next year are expected to double, indicating an incredibly 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 well and truly priced in VSEC’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe VSEC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 VSEC for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for VSEC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing VSE at this point in time. While conducting our analysis, we found that VSE has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in VSE, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for VSE?

VSE Corporation operates as a diversified aftermarket products and services company in the United States.

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Rewards

  • Trading at 85.2% below our estimate of its fair value

  • Earnings are forecast to grow 17.24% per year

  • Earnings grew by 278.1% over the past year

Risks

  • Debt is not well covered by operating cash flow

  • Significant insider selling over the past 3 months

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1Y Return

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