Yahoo Finance Should You Investigate FedEx Corporation (NYSE:FDX) At US$224?
Let's talk about the popular FedEx Corporation (NYSE:FDX). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on FedEx’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for FedEx
Is FedEx Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that FedEx’s ratio of 18.83x is trading slightly above its industry peers’ ratio of 14.24x, which means if you buy FedEx today, you’d be paying a relatively reasonable price for it. And if you believe FedEx 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 FedEx’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.
What does the future of FedEx look like?
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. FedEx's earnings over the next few years are expected to increase by 89%, 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 FDX’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 financial strength of the company. Have these factors changed since the last time you looked at FDX? 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 an eye on FDX, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for FDX, 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 FedEx as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for FedEx you should know about.
If you are no longer interested in FedEx, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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