Today we're going to take a look at the well-established United Parcel Service, Inc. (NYSE:UPS). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on United Parcel Service’s outlook and valuation to see if the opportunity still exists.
Is United Parcel Service Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.23% above my intrinsic value, which means if you buy United Parcel Service today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $162.24, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because United Parcel Service’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.
Can we expect growth from United Parcel Service?
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. However, with a relatively muted profit growth of 2.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for United Parcel Service, at least in the short term.
What This Means For You
Are you a shareholder? It seems like the market has already priced in UPS’s future outlook, 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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on UPS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 1 warning sign for United Parcel Service you should know about.
If you are no longer interested in United Parcel Service, 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.
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