Is It Too Late To Consider Buying Bright Horizons Family Solutions Inc. (NYSE:BFAM)?

Bright Horizons Family Solutions Inc. (NYSE:BFAM), 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. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Bright Horizons Family Solutions’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Bright Horizons Family Solutions

Is Bright Horizons Family Solutions Still Cheap?

Bright Horizons Family Solutions appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 45.58x is currently well-above the industry average of 19.36x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Bright Horizons Family Solutions’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Bright Horizons Family 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. 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 more than double over the next couple of years, the future seems bright for Bright Horizons Family Solutions. 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 well and truly priced in BFAM’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 BFAM 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 BFAM 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 positive outlook is encouraging for BFAM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Bright Horizons Family Solutions, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Bright Horizons Family Solutions and we think they deserve your attention.

If you are no longer interested in Bright Horizons Family 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.