Paul Price loves to make repeat profits.
“I've been in and out of Griffon Corp multiple times over the past few years,” Price wrote recently on Real Money. “It's a very volatile stock with fine fundamentals making it a terrific trading vehicle.”
Price noted that “Since the end of 2013, GFF's earnings per share surged by over 560%. Its dividend rate more than tripled. Continuous shareholders made decent money, but the best gains came to those who traded in and out occasionally based on fluctuations in the stock's valuation levels."
Now is one such time. “GFF typically trades for about 21.7-times current year's earnings, accompanied by around 1.3% in current yield. As I'm writing, GFF was available at just 12.3-times fiscal 2021 estimates (fiscal year ends Sept. 30, 2021) while paying a bit higher than average, 1.35% yield.”
He added that, "Based on year-ahead projections those change to a less than 11.1-times multiple and a 1.44% yield. A simple regression towards the mean valuation could easily send GFF up to near $43 by the end of calendar 2022.”
The company’s underlying strength tells Price that this is a stock which will keep bouncing back up when it’s down, while its predictable volatility tells him that this is a stock which will probably sink back down when it’s up. This creates opportunities to buy in while the stock is on a low cycle and sell off once it climbs.
“Potential reward appears to far outweigh risk from the current price."