Stock Analysis

Is There Now An Opportunity In Summit Materials, Inc. (NYSE:SUM)?

  •  Updated
NYSE:SUM
Source: Shutterstock

While Summit Materials, Inc. (NYSE:SUM) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase 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. However, what if the stock is still a bargain? Let’s take a look at Summit Materials’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Summit Materials

What Is Summit Materials Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 12.51x is currently trading slightly below its industry peers’ ratio of 14.07x, which means if you buy Summit Materials today, you’d be paying a reasonable price for it. And if you believe that Summit Materials should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Summit Materials’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Summit Materials look like?

earnings-and-revenue-growth
NYSE:SUM Earnings and Revenue Growth August 31st 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 21% over the next couple of years, the future seems bright for Summit Materials. 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 SUM’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 SUM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SUM, 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 SUM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 2 warning signs we've spotted with Summit Materials (including 1 which is a bit unpleasant).

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.

Valuation is complex, but we're helping make it simple.

Find out whether Summit Materials is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

About NYSE:SUM

Summit Materials

Summit Materials, Inc., through its subsidiaries, produces and sells construction materials and related downstream products for the public infrastructure, and residential and nonresidential end markets.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth0
Past Performance4
Financial Health3
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Good value with proven track record.