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Finning International Inc. (TSE:FTT), is not the largest company out there, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$44.86 at one point, and dropping to the lows of CA$35.68. 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 Finning International's current trading price of CA$38.07 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 Finning International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Finning International?
According to our 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. We’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 10.06x is currently trading slightly below its industry peers’ ratio of 12.35x, which means if you buy Finning International today, you’d be paying a decent price for it. And if you believe Finning International should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Finning International’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.
See our latest analysis for Finning International
Can we expect growth from Finning International?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive for Finning International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.