While Frontier Communications Parent, Inc. (NASDAQ:FYBR) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. 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. However, what if the stock is still a bargain? Today I will analyse the most recent data on Frontier Communications Parent's outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Frontier Communications Parent
Is Frontier Communications Parent Still Cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Frontier Communications Parent's ratio of 13.57x is trading slightly above its industry peers' ratio of 8.58x, which means if you buy Frontier Communications Parent today, you'd be paying a relatively reasonable price for it. And if you believe that Frontier Communications Parent should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Frontier Communications Parent's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Frontier Communications Parent?
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 Frontier Communications Parent, at least in the near future.
What This Means For You
Are you a shareholder? Currently, FYBR appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on FYBR, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on FYBR for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help crystallize your views on FYBR should the price fluctuate below the industry PE ratio.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 5 warning signs for Frontier Communications Parent (3 make us uncomfortable) you should be familiar with.
If you are no longer interested in Frontier Communications Parent, 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.