Summit Materials Inc (SUM) Is Poised For Growth

Using the Graham Formula we can calculate the intrinsic value of the stock and compare that with its current market price, which is at roughly $24.14 as of closing on February 8th. Based on analysts’ estimates of 10.5% earnings growth (2) over the next 5 years, we can see that SUM should be trading at about $30/share. This tells us that it’s possibly undervalued by 24% currently. Many analysts seem to have a similar bullish outlook for the company.

According to Thomson Reuters, out of all the analysts covering the stock, the average 12 month price target is $28.20, which isn’t as high as the intrinsic value calculated by the Graham formula but the general direction is clear. Plus, we should keep in mind that out of the last four quarters there were 3 positive surprises and only 1 disappointing surprise based on earnings expectations. SUM has also been able to gain market share by growing revenues faster than the industry average. This trend continues from the previous year when revenue growth at Summit Materials Inc (NYSE:SUM) and the Construction Materials industry were 12.19% and 9.26%, respectively. Overall SUM would be an appropriate stock to add to a diversified portfolio for long term infrastructure exposure in the United States.

Disclosure: This author has 100 shares of Summit Materials Inc (SUM) as of writing this post.

Kevin is a graphic designer from Vancouver, BC. He runs the site Freedom 35 Blog in his spare time and writes commentaries about business, investing, personal finance, and economics.

Note: This post was originally published on ModestMoney.com. Check out their site for the latest investing news and analysis.

Additional Links:

(1) https://www.com-unik.info/2017/02/08/lomas-capital-management-llc-boosts-stake-in-summit-materials-inc-sum.html

(2) http://www.nasdaq.com/symbol/sum/earnings-growth