Graco Inc. (NYSE:GGG), which is in the machinery business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$51.20 at one point, and dropping to the lows of US$43.53. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Graco's current trading price of US$46.24 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Graco’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Graco still cheap?
According to my valuation model, Graco seems to be fairly priced at around 10.44% above my intrinsic value, which means if you buy Graco today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $41.87, there’s only an insignificant downside when the price falls to its real value. What's more, Graco’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Graco?
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. Though in the case of Graco, it is expected to deliver a relatively unexciting earnings growth of 0.07%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Graco, at least in the near term.
What this means for you:
Are you a shareholder? GGG’s 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 financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 GGG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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 Graco. You can find everything you need to know about Graco in the latest infographic research report. If you are no longer interested in Graco, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.