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The Greenbrier Companies, Inc. (NYSE:GBX), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the 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? Today I will analyse the most recent data on Greenbrier Companies’s outlook and valuation to see if the opportunity still exists.
Is Greenbrier Companies still cheap?
Good news, investors! Greenbrier Companies is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Greenbrier Companies’s ratio of 13.05x is below its peer average of 25.78x, which indicates the stock is trading at a lower price compared to the Machinery industry. Although, there may be another chance to buy again in the future. This is because Greenbrier Companies’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Greenbrier Companies?
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. However, with a negative profit growth of -20% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Greenbrier Companies. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although GBX is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to GBX, 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 tabs on GBX for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Greenbrier Companies (including 1 which makes us a bit uncomfortable).
If you are no longer interested in Greenbrier Companies, 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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