At $39.03, Is USG Corporation (NYSE:USG) A Buy?
USG Corporation (NYSE:USG), a building company based in United States, saw a decent share price growth in the teens level on the NYSE over the last few months. 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, could the stock still be trading at a relatively cheap price? Let’s examine USG’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for USG
Is USG still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 29.08x is currently trading slightly above its industry peers’ ratio of 25.15x, which means if you buy USG today, you’d be paying a relatively fair price for it. And if you believe that USG should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since USG’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.
Can we expect growth from USG?
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. USG’s earnings over the next few years are expected to increase by 93.80%, indicating a highly optimistic future ahead. This should lead to more 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 USG’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at USG? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on USG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for USG, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on USG. You can find everything you need to know about USG in the latest infographic research report. If you are no longer interested in USG, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
