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GMS Inc. (NYSE:GMS), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on GMS’s outlook and valuation to see if the opportunity still exists.
Is GMS still cheap?
Good news, investors! GMS is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $36.39, but it is currently trading at US$25.84 on the share market, meaning that there is still an opportunity to buy now. However, given that GMS’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will GMS generate?
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. With profit expected to more than double over the next couple of years, the future seems bright for GMS. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since GMS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on GMS for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GMS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you want to dive deeper into GMS, you'd also look into what risks it is currently facing. When we did our research, we found 5 warning signs for GMS (1 is a bit concerning!) that we believe deserve your full attention.
If you are no longer interested in GMS, 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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