Is Blue Buffalo Pet Products Inc (NASDAQ:BUFF) Undervalued?
Blue Buffalo Pet Products Inc (NASDAQ:BUFF), a food company based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Blue Buffalo Pet Products’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Blue Buffalo Pet Products
What’s the opportunity in Blue Buffalo Pet Products?
Blue Buffalo Pet Products appears to be overvalued by 49% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$39.90 on the market compared to my intrinsic value of $26.83. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Blue Buffalo Pet Products’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Blue Buffalo Pet Products generate?
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. With profit expected to grow by 74.57% over the next couple of years, the future seems bright for Blue Buffalo Pet Products. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in BUFF’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe BUFF should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on BUFF for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for BUFF, which means it’s worth diving deeper into other factors 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 Blue Buffalo Pet Products. You can find everything you need to know about Blue Buffalo Pet Products in the latest infographic research report. If you are no longer interested in Blue Buffalo Pet Products, 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.
