Is Now The Time To Look At Buying Owens Corning (NYSE:OC)?
While Owens Corning (NYSE:OC) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$104 and falling to the lows of US$84.82. 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 Owens Corning's current trading price of US$92.65 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Owens Corning’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Owens Corning
Is Owens Corning Still Cheap?
Great news for investors – Owens Corning is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Owens Corning’s ratio of 6.78x is below its peer average of 13.34x, which indicates the stock is trading at a lower price compared to the Building industry. Although, there may be another chance to buy again in the future. This is because Owens Corning’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 does the future of Owens Corning look like?
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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Owens Corning, at least in the near future.
What This Means For You
Are you a shareholder? Although OC is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to OC, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on OC for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So while earnings quality is important, it's equally important to consider the risks facing Owens Corning at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Owens Corning (including 1 which is a bit concerning).
If you are no longer interested in Owens Corning, 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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