What Does Domtar Corporation's (NYSE:UFS) Share Price Indicate?
Domtar Corporation (NYSE:UFS), which is in the forestry business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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 take a look at Domtar’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Domtar
What's the opportunity in Domtar?
Great news for investors – Domtar is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $64.29, but it is currently trading at US$39.33 on the share market, meaning that there is still an opportunity to buy now. However, given that Domtar’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.
Can we expect growth from Domtar?
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. However, with a negative profit growth of -7.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Domtar. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although UFS is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to UFS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on UFS for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Domtar. You can find everything you need to know about Domtar in the latest infographic research report. If you are no longer interested in Domtar, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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. Thank you for reading.
