Fortune Brands Home & Security, Inc. (NYSE:FBHS), 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$70.05 and falling to the lows of US$55.61. 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 Fortune Brands Home & Security's current trading price of US$55.61 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 Fortune Brands Home & Security’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 Fortune Brands Home & Security
What Is Fortune Brands Home & Security Worth?
Great news for investors – Fortune Brands Home & Security is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 9.58x is currently well-below the industry average of 14.65x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Fortune Brands Home & Security’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 kind of growth will Fortune Brands Home & Security 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. 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. With profit expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for Fortune Brands Home & Security. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since FBHS is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.