Fletcher Building Limited (NZSE:FBU), which is in the basic materials business, and is based in New Zealand, received a lot of attention from a substantial price movement on the NZSE over the last few months, increasing to NZ$5.59 at one point, and dropping to the lows of NZ$3.15. 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 Fletcher Building's current trading price of NZ$3.44 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Fletcher Building’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Fletcher Building worth?
Great news for investors – Fletcher Building is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is NZ$5.56, but it is currently trading at NZ$3.44 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Fletcher Building’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Fletcher Building generate?
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 a relatively muted profit growth of 1.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Fletcher Building, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since FBU is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on FBU for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FBU. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fletcher Building. You can find everything you need to know about Fletcher Building in the latest infographic research report. If you are no longer interested in Fletcher Building, 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.