Is United Parcel Service, Inc. (NYSE:UPS) Potentially Undervalued?

United Parcel Service, Inc. (NYSE:UPS) saw significant share price movement during recent months on the NYSE, rising to highs of US$161 and falling to the lows of US$139. 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 United Parcel Service's current trading price of US$151 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at United Parcel Service’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 United Parcel Service

What Is United Parcel Service Worth?

According to our valuation model, United Parcel Service seems to be fairly priced at around 11% below our intrinsic value, which means if you buy United Parcel Service today, you’d be paying a fair price for it. And if you believe the company’s true value is $169.31, 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 United Parcel Service’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 United Parcel Service generate?

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. United Parcel Service's earnings over the next few years are expected to increase by 37%, 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 UPS’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 financial strength of the company. 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 UPS, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing United Parcel Service at this point in time. While conducting our analysis, we found that United Parcel Service has 3 warning signs and it would be unwise to ignore these.

If you are no longer interested in United Parcel Service, 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.