Question

A friend knows that you work for FedEx and he asked your opinion about whether he should use a small inheritance to invest in FedEx stock(stock symbol FDX, traded on the New York Stock exchange, NAICS Code 492110. Being the conscientious type, you decide to actually research the financial reports for FedEx so you can give your friend a well-supported opinion.

Answer 1

FedEx Corporation (NYSE:FDX) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE.

What is FedEx worth?

FedEx seems to be fairly priced at around 5.5% below intrinsic value, which means if you buy FedEx today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $105.48, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because FedEx’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 kind of growth will FedEx 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. With revenues expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for FedEx. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Now may not be the most optimal time to buy, given it is trading around its fair value and global market crisis due to COVID-19. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop. However, if you are looking at investing for long term then you can invest money in tranches (SIP form) non corrections