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Let's talk about the popular Norfolk Southern Corporation (NYSE:NSC). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Norfolk Southern’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Norfolk Southern
What's The Opportunity In Norfolk Southern?
According to our valuation model, Norfolk Southern seems to be fairly priced at around 8.6% below our intrinsic value, which means if you buy Norfolk Southern today, you’d be paying a fair price for it. And if you believe the company’s true value is $280.23, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Norfolk Southern’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.
Can we expect growth from Norfolk Southern?
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 37% over the next couple of years, the future seems bright for Norfolk Southern. 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 NSC’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 track record of its management team. 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?
Are you a potential investor? If you’ve been keeping an eye on NSC, now may not be the most optimal 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.