At US$85.71, Is BlueLinx Holdings Inc. (NYSE:BXC) Worth Looking At Closely?
BlueLinx Holdings Inc. (NYSE:BXC), 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 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 examine BlueLinx Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for BlueLinx Holdings
What's the opportunity in BlueLinx Holdings?
Great news for investors – BlueLinx Holdings is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.43x is currently well-below the industry average of 17.37x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, BlueLinx Holdings’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.
Can we expect growth from BlueLinx Holdings?
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 BlueLinx Holdings, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although BXC is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to BXC, 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 BXC 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.
If you want to dive deeper into BlueLinx Holdings, you'd also look into what risks it is currently facing. For example, we've found that BlueLinx Holdings has 4 warning signs (2 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
If you are no longer interested in BlueLinx Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
