Should You Investigate Green Brick Partners, Inc. (NYSE:GRBK) At US$40.26?

Green Brick Partners, Inc. (NYSE:GRBK), 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$58.51 and falling to the lows of US$40.95. 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 Green Brick Partners' current trading price of US$40.26 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Green Brick Partners’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 Green Brick Partners

What Is Green Brick Partners Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Green Brick Partners’s ratio of 6.88x is trading slightly below its industry peers’ ratio of 7.7x, which means if you buy Green Brick Partners today, you’d be paying a reasonable price for it. And if you believe Green Brick Partners should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Green Brick Partners’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Green Brick Partners?

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. With profit expected to grow by 29% over the next couple of years, the future seems bright for Green Brick Partners. 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? It seems like the market has already priced in GRBK’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GRBK? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on GRBK, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for GRBK, 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.

Diving deeper into the forecasts for Green Brick Partners mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Green Brick Partners, 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.