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Let's talk about the popular W.W. Grainger, Inc. (NYSE:GWW). The company's shares saw significant share price movement during recent months on the NYSE, rising to highs of US$1,194 and falling to the lows of US$982. 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 W.W. Grainger's current trading price of US$982 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 W.W. Grainger’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for W.W. Grainger
Is W.W. Grainger Still Cheap?
According to our valuation model, the stock is currently overvalued by about 25%, trading at US$982 compared to our intrinsic value of $786.94. This means that the opportunity to buy W.W. Grainger at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that W.W. Grainger’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will W.W. Grainger 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. W.W. Grainger's earnings over the next few years are expected to increase by 21%, 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 well and truly priced in GWW’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe GWW should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on GWW for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for GWW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.