Granite Construction Incorporated (NYSE:GVA), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a 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 Granite Construction’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Granite Construction still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.7% below my intrinsic value, which means if you buy Granite Construction today, you’d be paying a fair price for it. And if you believe that the stock is really worth $34.65, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Granite Construction’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 Granite Construction 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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Granite Construction. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? GVA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 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 GVA, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 3 warning signs for Granite Construction (1 doesn't sit too well with us!) that we believe deserve your full attention.
If you are no longer interested in Granite Construction, 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.