Should You Investigate Bright Horizons Family Solutions Inc. (NYSE:BFAM) At US$136?

By
Simply Wall St
Published
March 23, 2022
NYSE:BFAM
Source: Shutterstock

While Bright Horizons Family Solutions Inc. (NYSE:BFAM) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. 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. But what if there is still an opportunity to buy? Let’s take a look at Bright Horizons Family Solutions’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Bright Horizons Family Solutions

What's the opportunity in Bright Horizons Family Solutions?

Good news, investors! Bright Horizons Family Solutions is still a bargain right now. According to my valuation, the intrinsic value for the stock is $177.27, but it is currently trading at US$136 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Bright Horizons Family Solutions’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Bright Horizons Family Solutions?

earnings-and-revenue-growth
NYSE:BFAM Earnings and Revenue Growth March 23rd 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. 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. Bright Horizons Family Solutions' earnings over the next few years are expected to double, indicating a very 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? Since BFAM is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on BFAM for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BFAM. 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Bright Horizons Family Solutions you should be aware of.

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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