Advanced Drainage Systems, Inc. (NYSE:WMS), which is in the building business, and is based in United States, saw a decent share price growth in the teens level on the NYSE over the last few months. As a US$2.3b market cap stock, it seems odd Advanced Drainage Systems is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on Advanced Drainage Systems’s outlook and valuation to see if the opportunity still exists.
What is Advanced Drainage Systems worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11.84% above my intrinsic value, which means if you buy Advanced Drainage Systems today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $29.83, there’s only an insignificant downside when the price falls to its real value. What's more, Advanced Drainage Systems’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Advanced Drainage Systems look like?
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. In the upcoming year, Advanced Drainage Systems’s earnings are expected to increase by 42%, 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? WMS’s optimistic future growth appears to have been factored into the current share price, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on WMS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 Advanced Drainage Systems. You can find everything you need to know about Advanced Drainage Systems in the latest infographic research report. If you are no longer interested in Advanced Drainage Systems, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.