Stock Analysis

Is Now An Opportune Moment To Examine IAA, Inc. (NYSE:IAA)?

NYSE:IAA
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IAA, Inc. (NYSE:IAA), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$63.34 and falling to the lows of US$53.33. 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 IAA's current trading price of US$57.96 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 IAA’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 IAA

Is IAA still cheap?

IAA appears to be overvalued by 22% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$57.96 on the market compared to my intrinsic value of $47.54. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that IAA’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.

Can we expect growth from IAA?

earnings-and-revenue-growth
NYSE:IAA Earnings and Revenue Growth July 16th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 45% over the next couple of years, the future seems bright for IAA. 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? IAA’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IAA 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 IAA 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 positive outlook is encouraging for IAA, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for IAA and you'll want to know about it.

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This article by Simply Wall St is general in nature. 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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