Is it too late to consider buying Granite Construction Incorporated (NYSE: GVA)?

Granite Incorporated Construction (NYSE: GVA), may not be a large-cap stock, but it has led the NYSE gainers with a relatively large price rally over the past two weeks. With plenty of analysts covering the stock, we can expect any price-sensitive announcements to have already factored into the stock price. However, what if the stock is still a bargain? Let’s take a closer look at Granite Construction’s valuation and outlook to determine if there’s still a bargain opportunity.

Check out our latest analysis for Granite Construction

What is the opportunity in granite construction?

According to my multiple price model, which compares the company’s price-earnings ratio to the industry average, the stock price seems justified. In this case, I used the Price/Earnings (PE) ratio since there is not enough information to reliably predict the stock’s cash flow. I find that Granite Construction’s ratio of 27.5x trades slightly above its industry peers’ ratio of 25.69x, which means that if you buy Granite Construction today, you would pay a price for it relatively reasonable. And if you think Granite Construction should be trading within this range, then there’s not much room for the stock price to rise above the levels of other industry peers over the long term. So, is there another chance to buy low in the future? Since Granite Construction’s share is quite volatile (meaning its price movements are amplified relative to the rest of the market), this could mean that the price may drop, giving us the opportunity to buy later. This is based on its high beta, which is a good indicator of stock price volatility.

Can we expect growth from Granite Construction?

earnings-and-revenue-growth

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With profits expected to more than double over the next two years, the future looks bright for Granite Construction. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.

What this means for you

Are you a shareholder? GVA’s optimistic future growth appears to have been priced into the current share price, with shares trading around industry price multiples. However, there are also other important factors that we haven’t considered today, such as the background of its management team. Have these factors changed since the last time you consulted GVA? Will you have enough conviction to buy if the price moves below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on GVA, now might not be the best time to buy, given that it’s trading around industry price multiples. However, the positive outlook is encouraging for GVA, which means that it is worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Granite Construction, you should also consider the risks it currently faces. To do this, you need to find out about the 2 warning signs we spotted with Granite Construction (including 1 essential).

If you are no longer interested in Granite Construction, you can use our free platform to see our list of more 50 other stocks with strong growth potential.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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