Yahoo Finance Is It Too Late To Consider Buying Simpson Manufacturing Co., Inc. (NYSE:SSD)?
Simpson Manufacturing Co., Inc. (NYSE:SSD), which is in the building business, and is based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. 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, could the stock still be trading at a relatively cheap price? Let’s take a look at Simpson Manufacturing’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Simpson Manufacturing
What's the opportunity in Simpson Manufacturing?
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. 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 Simpson Manufacturing’s ratio of 20.73x is trading slightly above its industry peers’ ratio of 16.38x, 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. So, is there another chance to buy low in the future? Given that Simpson Manufacturing’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.
Can we expect growth from Simpson Manufacturing?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Simpson Manufacturing, at least in the near future.
What this means for you:
Are you a shareholder? SSD seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on SSD, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on SSD for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SSD should the price fluctuate below the industry PE ratio.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Simpson Manufacturing. You can find everything you need to know about Simpson Manufacturing in the latest infographic research report. If you are no longer interested in Simpson Manufacturing, you can use our free platform to see my 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. 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. Thank you for reading.
