Washington Federal, Inc. (NASDAQ:WAFD), operating in the financial services industry based in United States, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $36.89 and falling to the lows of $31.57. 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 Washington Federal's current trading price of $34.32 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 Washington Federal’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Washington Federal?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 13.36x is currently trading slightly below its industry peers’ ratio of 13.71x, which means if you buy Washington Federal today, you’d be paying a fair price for it. And if you believe Washington Federal should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. So, is there another chance to buy low in the future? Given that Washington Federal’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Washington Federal 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 6.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Washington Federal, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in WAFD’s growth outlook, 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 WAFD? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on WAFD, now may not be the most optimal time to buy, given it is trading around its fair value. 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Washington Federal. You can find everything you need to know about Washington Federal in the latest infographic research report. If you are no longer interested in Washington Federal, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.