Beacon Roofing Supply, Inc. (NASDAQ:BECN), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Beacon Roofing Supply’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Beacon Roofing Supply
What’s the opportunity in Beacon Roofing Supply?
According to my price multiple model, which makes a comparison between the company’s price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 13.13x is currently trading slightly above its industry peers’ ratio of 12.23x, which means if you buy Beacon Roofing Supply today, you’d be paying a relatively reasonable price for it. And if you believe Beacon Roofing Supply should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Beacon Roofing Supply’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Beacon Roofing Supply?
earnings-and-revenue-growth
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. Beacon Roofing Supply’s earnings over the next few years are expected to increase by 83%, 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? It seems like the market has already priced in BECN’s positive outlook, with shares trading around industry price multiples. 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 BECN? Will you have enough conviction to buy should the price fluctuate below the industry …….
Source: https://finance.yahoo.com/news/think-buying-beacon-roofing-supply-161453058.html