ACCO Brands Corporation (NYSE:ACCO), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine ACCO Brands’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is ACCO Brands still cheap?
Good news, investors! ACCO Brands is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.81x is currently well-below the industry average of 24.67x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because ACCO Brands’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 kind of growth will ACCO Brands generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of ACCO Brands, it is expected to deliver a relatively unexciting earnings growth of 7.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for ACCO Brands, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since ACCO is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on ACCO for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ACCO. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you'd like to know more about ACCO Brands as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for ACCO Brands you should be mindful of and 1 of them can't be ignored.
If you are no longer interested in ACCO Brands, 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.
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