Dycom Industries, Inc. (NYSE:DY), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a 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? Today I will analyse the most recent data on Dycom Industries’s outlook and valuation to see if the opportunity still exists.
Is Dycom Industries still cheap?
According to my valuation model, the stock is currently overvalued by about 31%, trading at US$46.98 compared to my intrinsic value of $35.83. This means that the opportunity to buy Dycom Industries at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Dycom Industries’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Dycom Industries?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Dycom Industries’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in DY’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe DY 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 tabs on DY for some time, 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 positive outlook is encouraging for DY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 4 warning signs for Dycom Industries you should be mindful of and 1 of these can't be ignored.
If you are no longer interested in Dycom Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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