Yahoo Finance Why Atlas Corp. (NYSE:ATCO) Could Be Worth Watching
While Atlas Corp. (NYSE:ATCO) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap 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? Today I will analyse the most recent data on Atlas’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Atlas
Is Atlas 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.82x is currently trading slightly below its industry peers’ ratio of 12.05x, which means if you buy Atlas today, you’d be paying a decent price for it. And if you believe Atlas should be trading in this range, then there isn’t much room for the share price to 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 Atlas’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 kind of growth will Atlas 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. 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. In the upcoming year, Atlas' earnings are expected to increase by 33%, 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? ATCO’s optimistic future growth appears to have been factored into the current share price, 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 ATCO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on ATCO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ATCO, 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 3 warning signs for Atlas and we think they deserve your attention.
If you are no longer interested in Atlas, 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.
