GMS Inc. (NYSE:GMS), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. The company is now trading at yearly-high levels following the recent surge in its share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Let's examine GMS's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is GMS Still Cheap?
Great news for investors – GMS is still trading at a fairly cheap price. According to our valuation, the intrinsic value for the stock is $146.04, but it is currently trading at US$97.34 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because GMS'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 GMS 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. 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. However, with a relatively muted profit growth of 5.6% expected over the next couple of years, growth doesn't seem like a key driver for a buy decision for GMS, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since GMS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on GMS for a while, now might be the time to enter the stock. Its future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy GMS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of GMS.
If you are no longer interested in GMS, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
