American Woodmark Corporation (NASDAQ:AMWD), a US$1.43b small-cap, is a building product company operating in an industry, which is predominantly affected by shifts in the housing market, as a result of demand from construction projects. Capital goods analysts are forecasting for the entire industry, a strong double-digit growth of 15.53% in the upcoming year , and a massive growth of 38.91% over the next couple of years. the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether American Woodmark is a laggard or leader relative to its capital goods peers.
What’s the catalyst for American Woodmark’s sector growth?
Companies appear highly competitive with each other and consolidation seems to be a common theme. Over the past year, the industry saw growth in the teens, beating the US market growth of 14.23%. American Woodmark lags the pack with its negative growth rate of -11.32% over the past year, which indicates the company has been growing at a slower pace than its building products peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 86.49% in the upcoming year. This future growth may make American Woodmark a more expensive stock relative to its peers.
Is American Woodmark and the sector relatively cheap?
Building products companies are typically trading at a PE of 21.38x, relatively similar to the rest of the US stock market PE of 18.08x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 13.16% on equities compared to the market’s 11.40%. On the stock-level, American Woodmark is trading at a PE ratio of 21.74x, which is relatively in-line with the average building products stock. In terms of returns, American Woodmark generated 10.86% in the past year, which is 2.31% below the building products sector.
American Woodmark’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If American Woodmark has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at American Woodmark’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AMWD’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of American Woodmark? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.