What Does Bright Horizons Family Solutions Inc.'s (NYSE:BFAM) Share Price Indicate?

Bright Horizons Family Solutions Inc. (NYSE:BFAM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$118 at one point, and dropping to the lows of US$103. 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 Bright Horizons Family Solutions' current trading price of US$105 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 Bright Horizons Family Solutions’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Bright Horizons Family Solutions

Is Bright Horizons Family Solutions Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 16% below our intrinsic value, which means if you buy Bright Horizons Family Solutions today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $125.52, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Bright Horizons Family Solutions’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.

What kind of growth will Bright Horizons Family Solutions generate?

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. In the upcoming year, Bright Horizons Family Solutions' earnings are expected to increase by 87%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in BFAM’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on BFAM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

If you'd like to know more about Bright Horizons Family Solutions as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Bright Horizons Family Solutions has 2 warning signs and it would be unwise to ignore them.

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.