What Is SJW Group’s (SJW) Share Price Doing?
SJW Group (NYSE:SJW), a water utilities company based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Less covered, small-stocks like SJW sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could SJW still be trading at a low price relative to its actual value? Let’s examine SJW’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for SJW Group
What’s the opportunity in SJW?
According to my relative valuation model, SJW seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 23.3x is currently trading slightly below its industry peers’ ratio of 30.9x, which means if you buy SJW today, you’d be paying a fair price for it. And if you believe SJW should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, SJW’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for SJW to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will SJW generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted revenue growth of 5.00% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for SJW, at least in the short term.
What this means for you:
Are you a shareholder? SJW’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 SJW? 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 an eye on SJW, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for SJW, which means it’s worth diving deeper into 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 SJW Group. You can find everything you need to know about SJW in the latest infographic research report. If you are no longer interested in SJW Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass 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.
