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U.S. Concrete, Inc. (NASDAQ:USCR), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine U.S. Concrete’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in U.S. Concrete?
The share price seems sensible at the moment according to my price multiple model, where I compare 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 U.S. Concrete’s ratio of 25.93x is trading in-line with its industry peers’ ratio, which means if you buy U.S. Concrete today, you’d be paying a relatively sensible price for it. Is there another opportunity to buy low in the future? Since U.S. Concrete’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 U.S. Concrete generate?
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. However, with a relatively muted profit growth of 7.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for U.S. Concrete, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in USCR’s growth outlook, with shares trading around industry price multiples. 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 USCR? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on USCR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 U.S. Concrete at this point in time. For example, U.S. Concrete has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you are no longer interested in U.S. Concrete, 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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