Vulcan Materials Company (NYSE:VMC) led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a large-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, could the stock still be trading at a relatively cheap price? Let’s examine Vulcan Materials’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Vulcan Materials?
According to my valuation model, Vulcan Materials seems to be fairly priced at around 10.60% above my intrinsic value, which means if you buy Vulcan Materials today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $97.90, there’s only an insignificant downside when the price falls to its real value. What's more, Vulcan Materials’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Vulcan Materials 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. 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. Vulcan Materials’s earnings over the next few years are expected to increase by 20%, 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? VMC’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 track record of its management team. 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 VMC, now may not be the most optimal 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 further examining 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 Vulcan Materials. You can find everything you need to know about Vulcan Materials in the latest infographic research report. If you are no longer interested in Vulcan Materials, 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 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.
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