What Does Atlas Corp.'s (NYSE:ATCO) Share Price Indicate?

While Atlas Corp. (NYSE:ATCO) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$16.06 and falling to the lows of US$12.32. 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 Atlas' current trading price of US$12.36 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 Atlas’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 Atlas

What is Atlas worth?

The share price seems sensible at the moment 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 7.81x is trading slightly above its industry peers’ ratio of 4.14x, which means if you buy Atlas today, you’d be paying a relatively reasonable price for it. And if you believe Atlas should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Atlas’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Atlas look like?

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 grow by 56% over the next couple of years, the future seems 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? It seems like the market has already priced in ATCO’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 financial strength of the company. Have these factors changed since the last time you looked at ATCO? 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 tabs on ATCO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ATCO, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Atlas.

If you are no longer interested in Atlas, 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.