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Simpson Manufacturing Co., Inc. (NYSE:SSD), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$197 and falling to the lows of US$158. 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 Simpson Manufacturing's current trading price of US$169 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 Simpson Manufacturing’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 Simpson Manufacturing
What's The Opportunity In Simpson Manufacturing?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 22.13x is currently trading slightly above its industry peers’ ratio of 20.82x, which means if you buy Simpson Manufacturing today, you’d be paying a relatively reasonable price for it. And if you believe that Simpson Manufacturing should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Simpson Manufacturing’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Simpson Manufacturing 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. Simpson Manufacturing's earnings growth are expected to be in the teens in the upcoming years, 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? It seems like the market has already priced in SSD’s positive outlook, with shares trading around industry price multiples. 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 SSD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?