While Simpson Manufacturing Co., Inc. (NYSE:SSD) might not have the largest market cap around , it saw significant share price movement during recent months on the NYSE, rising to highs of US$195 and falling to the lows of US$171. 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 Simpson Manufacturing's current trading price of US$185 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 Simpson Manufacturing's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Simpson Manufacturing Worth?
According to our 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. We'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 24.23x is currently trading slightly above its industry peers' ratio of 22.13x, which means if you buy Simpson Manufacturing today, you'd be paying a relatively sensible price for it. And if you believe Simpson Manufacturing 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. Is there another opportunity to buy low in the future? Since Simpson Manufacturing's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What does the future of Simpson Manufacturing look like?
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. 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. Though in the case of Simpson Manufacturing, it is expected to deliver a relatively unexciting earnings growth of 7.9%, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for Simpson Manufacturing, at least in the near term.
What This Means For You
Are you a shareholder? SSD's future growth appears to have been factored into the current share price, 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 SSD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping tabs on SSD, now may not be the most optimal time to buy, given it is trading around industry price multiples. 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.
If you'd like to know more about Simpson Manufacturing as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Simpson Manufacturing you should be aware of.
If you are no longer interested in Simpson Manufacturing, 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.
