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Comfort Systems USA, Inc. (NYSE:FIX), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a US$2.1b market-cap stock, it seems odd Comfort Systems USA is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Comfort Systems USA’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in Comfort Systems USA?
Good news, investors! Comfort Systems USA is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Comfort Systems USA’s ratio of 14.79x is below its peer average of 25.42x, which indicates the stock is trading at a lower price compared to the Construction industry. Although, there may be another chance to buy again in the future. This is because Comfort Systems USA’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 Comfort Systems USA 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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Comfort Systems USA, at least in the near future.
What this means for you:
Are you a shareholder? Although FIX is currently trading below the industry PE ratio, the negative profit 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 FIX, 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 FIX for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Comfort Systems USA has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Comfort Systems USA, 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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