Why Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) Could Be A Buy
Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), a construction company based in United States, saw significant share price volatility over the past couple of months on the NasdaqGS, rising to the highs of $5.65 and falling to the lows of $4.25. 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 Great Lakes Dredge & Dock’s current trading price of $4.55 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Great Lakes Dredge & Dock’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Great Lakes Dredge & Dock
What’s the opportunity in Great Lakes Dredge & Dock?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.22x is currently trading slightly below its industry peers’ ratio of 1.72x, which means if you buy Great Lakes Dredge & Dock today, you’d be paying a relatively fair price for it. And if you believe Great Lakes Dredge & Dock should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Great Lakes Dredge & Dock’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Great Lakes Dredge & Dock?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. In the upcoming year, Great Lakes Dredge & Dock’s earnings are expected to increase by 56.27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? GLDD’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at GLDD? 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 GLDD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for GLDD, which means it’s worth diving deeper into 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 Great Lakes Dredge & Dock. You can find everything you need to know about Great Lakes Dredge & Dock in the latest infographic research report. If you are no longer interested in Great Lakes Dredge & Dock, 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.
