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Today we're going to take a look at the well-established Builders FirstSource, Inc. (NYSE:BLDR). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$174 at one point, and dropping to the lows of US$114. 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 Builders FirstSource's current trading price of US$125 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 Builders FirstSource’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Builders FirstSource Still Cheap?
According to our valuation model, Builders FirstSource seems to be fairly priced at around 9.1% below our intrinsic value, which means if you buy Builders FirstSource today, you’d be paying a fair price for it. And if you believe the company’s true value is $137.29, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Builders FirstSource’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.
Check out our latest analysis for Builders FirstSource
What kind of growth will Builders FirstSource generate?
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. Builders FirstSource's earnings over the next few years are expected to increase by 23%, 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 BLDR’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 confidence to invest in the company should the price drop below its fair value?