Should You Think About Buying GMS Inc. (NYSE:GMS) Now?
While GMS Inc. (NYSE:GMS) might not be the most widely known stock at the moment, it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a mid-cap 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? Let’s examine GMS’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for GMS
What's The Opportunity In GMS?
Good news, investors! GMS is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $93.59, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. 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?
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. Though in the case of GMS, it is expected to deliver a negative earnings growth of -3.3%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although GMS is currently undervalued, the negative 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 GMS, 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 GMS for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into GMS, you'd also look into what risks it is currently facing. For example, we've found that GMS has 3 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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