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Foundation Building Materials, Inc. (NYSE:FBM), which is in the trade distributors business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Foundation Building Materials’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Foundation Building Materials
What's the opportunity in Foundation Building Materials?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13.89% above my intrinsic value, which means if you buy Foundation Building Materials today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $13.82, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Foundation Building Materials’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.
What does the future of Foundation Building Materials look like?
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. Foundation Building Materials’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? FBM’s optimistic future growth appears to have been factored into the current share price, 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?