Let’s talk about the popular United Parcel Service Inc (NYSE:UPS). The company’s shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $132.72 at one point, and dropping to the lows of $101.66. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether United Parcel Service’s current trading price of $108.66 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at United Parcel Service’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for United Parcel Service
What’s the opportunity in United Parcel Service?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.28x is currently trading slightly above its industry peers’ ratio of 16.92x, which means if you buy United Parcel Service today, you’d be paying a relatively fair price for it. And if you believe United Parcel Service should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since United Parcel Service’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 United Parcel Service 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. With profit expected to grow by 45.54% over the next couple of years, the future seems bright for United Parcel Service. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in UPS’s positive outlook, 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 UPS? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on UPS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for UPS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on United Parcel Service. You can find everything you need to know about United Parcel Service in the latest infographic research report. If you are no longer interested in United Parcel Service, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.