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While Beacon Roofing Supply, Inc. (NASDAQ:BECN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$59.47 at one point, and dropping to the lows of US$50.61. 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 Beacon Roofing Supply's current trading price of US$53.50 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 Beacon Roofing Supply’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 Beacon Roofing Supply
Is Beacon Roofing Supply Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 Beacon Roofing Supply’s ratio of 8.65x is trading slightly below its industry peers’ ratio of 12.22x, which means if you buy Beacon Roofing Supply today, you’d be paying a reasonable price for it. And if you believe Beacon Roofing Supply should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Beacon Roofing Supply’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 Beacon Roofing Supply look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 4.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Beacon Roofing Supply, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in BECN’s growth 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 BECN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?