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GATX Corporation (NYSE:GATX), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$133 at one point, and dropping to the lows of US$113. 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 GATX's current trading price of US$114 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 GATX’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for GATX
Is GATX Still Cheap?
GATX appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that GATX’s ratio of 18.68x is above its peer average of 13.23x, which suggests the stock is trading at a higher price compared to the Trade Distributors industry. But, is there another opportunity to buy low in the future? Given that GATX’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 does the future of GATX look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. GATX's earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? GATX’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe GATX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.