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Is It Too Late To Consider Buying ABM Industries Incorporated (NYSE:ABM)?

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Simply Wall St
·3 min read
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ABM Industries Incorporated (NYSE:ABM), 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 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 take a look at ABM Industries’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for ABM Industries

What's the opportunity in ABM Industries?

According to my valuation model, the stock is currently overvalued by about 24%, trading at US$40.54 compared to my intrinsic value of $32.64. This means that the opportunity to buy ABM Industries at a good price has disappeared! But, is there another opportunity to buy low in the future? Since ABM Industries’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will ABM Industries 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. 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 expected decline of -4.0% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for ABM Industries. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe ABM should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ABM for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for ABM Industries you should be mindful of and 1 of these doesn't sit too well with us.

If you are no longer interested in ABM Industries, 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.