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Is It Time To Consider Buying Beacon Roofing Supply, Inc. (NASDAQ:BECN)?

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·3 min read
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While Beacon Roofing Supply, Inc. (NASDAQ:BECN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. 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. However, what if the stock is still a bargain? Let’s examine Beacon Roofing Supply’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Beacon Roofing Supply

What's the opportunity in Beacon Roofing Supply?

According to my valuation model, Beacon Roofing Supply seems to be fairly priced at around 6.8% below my intrinsic value, which means if you buy Beacon Roofing Supply today, you’d be paying a fair price for it. And if you believe the company’s true value is $37.49, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Beacon Roofing Supply’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.

What kind of growth will Beacon Roofing Supply generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With profit expected to grow by 96% over the next year, the near-term future seems bright for Beacon Roofing Supply. 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? BECN’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on BECN, 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 the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing Beacon Roofing Supply at this point in time. Every company has risks, and we've spotted 2 warning signs for Beacon Roofing Supply (of which 1 is a bit concerning!) you should know about.

If you are no longer interested in Beacon Roofing Supply, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.