Today we're going to take a look at the well-established Advanced Drainage Systems, Inc. (NYSE:WMS). The company's stock saw a decent share price growth of 11% on the NYSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Let's take a look at Advanced Drainage Systems's outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Advanced Drainage Systems Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It's trading around 1.4% below our intrinsic value, which means if you buy Advanced Drainage Systems today, you'd be paying a reasonable price for it. And if you believe that the stock is really worth $157.62, then there isn't much room for the share price grow beyond what it's currently trading. So, is there another chance to buy low in the future? Given that Advanced Drainage Systems'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 Advanced Drainage Systems generate?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Advanced Drainage Systems' earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to 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 WMS's positive outlook, 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 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 tabs on WMS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which 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.
If you'd like to know more about Advanced Drainage Systems as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Advanced Drainage Systems has 1 warning sign and it would be unwise to ignore this.
If you are no longer interested in Advanced Drainage Systems, 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.
