Yahoo Finance Is It Too Late To Consider Buying Kansas City Southern (NYSE:KSU)?
Today we’re going to take a look at the well-established Kansas City Southern (NYSE:KSU). The company’s stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $119.88 at one point, and dropping to the lows of $102.57. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Kansas City Southern’s current trading price of $102.68 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Kansas City Southern’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Kansas City Southern
Is Kansas City Southern still cheap?
Kansas City Southern appears to be overvalued by 48.36% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$103 on the market compared to my intrinsic value of $69.21. This means that the opportunity to buy Kansas City Southern at a good price has disappeared! In addition to this, it seems like Kansas City Southern’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, 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 Kansas City Southern generate?
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 Kansas City Southern, at least in the near future.
What this means for you:
Are you a shareholder? If you believe KSU should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on KSU for a while, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Kansas City Southern. You can find everything you need to know about Kansas City Southern in the latest infographic research report. If you are no longer interested in Kansas City Southern, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
