At US$26.40, Is Summit Materials, Inc. (NYSE:SUM) Worth Looking At Closely?

Summit Materials, Inc. (NYSE:SUM), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$34.25 and falling to the lows of US$25.82. 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 Summit Materials' current trading price of US$26.40 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 Summit Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Summit Materials

What Is Summit Materials Worth?

Good news, investors! Summit Materials is still a bargain right now according to my price multiple model, which compares 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 Summit Materials’s ratio of 11.53x is below its peer average of 21.96x, which indicates the stock is trading at a lower price compared to the Basic Materials industry. What’s more interesting is that, Summit Materials’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Summit Materials?

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. Though in the case of Summit Materials, it is expected to deliver a negative earnings growth of -7.9%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although SUM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SUM, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SUM for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Summit Materials as a business, it's important to be aware of any risks it's facing. For example, Summit Materials has 3 warning signs (and 2 which are concerning) we think you should know about.

If you are no longer interested in Summit Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.