Atlas Corp. (NYSE:ATCO), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Atlas’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Atlas
Is Atlas still cheap?
Great news for investors – Atlas is still trading at a fairly cheap price according to my price multiple model, where I compare 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 Atlas’s ratio of 11.13x is below its peer average of 16.32x, which indicates the stock is trading at a lower price compared to the Shipping industry. However, given that Atlas’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Atlas?
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. With profit expected to more than double in the upcoming, the future appears to be extremely bright for Atlas. 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? Since ATCO is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit 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 financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on ATCO for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ATCO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
So while earnings quality is important, it's equally important to consider the risks facing Atlas at this point in time. Case in point: We've spotted 3 warning signs for Atlas you should be mindful of and 1 of these makes us a bit uncomfortable.
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This article by Simply Wall St is general in nature. 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.
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About NYSE:ATCO
Atlas
Atlas Corp. operates as an asset manager and operator of containerships.
Solid track record and good value.
