Is it time to buy Acuity Brands after delivering solid fiscal Q4 results?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 6, 2021
  • Acuity Brands shares on Wednesday surged more than 12% after announcing FQ4 results.
  • The company reported its most recent quarterly results before markets opened, beating analyst estimates.
  • The stock still trades at a reasonable forward P/E ratio of 18.74.

On Wednesday, Acuity Brands Inc. (NYSE:AYI) shares soared more than 12% after announcing its most recent quarterly results. The company reported its fiscal Q4 revenue and earnings before markets opened, beating analyst expectations.

The company posted FQ4 non-GAAP earnings per share of $3.27, beating the consensus Street estimate by $0.40. Moreover, its GAAP EPS of $2.72 also outperformed the average analyst expectation of $2.57, while revenue for the quarter grew by 11.4% to $992.7 million, $34.45 million ahead of estimates.

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From an investment perspective, Acuity Brands shares trade at an exciting forward P/E ratio of about 18.74. Therefore, investors could still find the stock as a compelling option despite Wednesday’s post-earnings spike.

In addition, analysts expect the company to experience annual bottom-line growth of about 12.93% over the next five years, thereby appealing to growth investors.

Therefore, although Acuity Brands shares are up nearly 65% this year and more than 80% over the last 12 months, the stock seems to be an exciting growth opportunity for long-term investors.

Source – TradingView

Should you wait for a pullback?

Technically, Acuity Brands appears to be trading within a gently descending channel formation in the intraday chart. However, Wednesday’s sharp spike initiated an upward channel breakout, pushing the stock to overbought conditions.

Therefore, it seems a pullback is inevitable as investors prepare to take some profits. They could target potential pullbacks at approximately $186.45 or lower at $174.47. However, if the bull run continues, the stock could find resistance at $208.48 or higher at $220.14.

A pullback presents a better opportunity

In summary, although Acuity Brands shares continue to enjoy solid bullish momentum, the stock has surged to the overbought conditions of the 14-day RSI, creating an opportunity for a pullback.

Moreover, whilst its forward P/E of 18.74 looks exciting, its trailing 12-month P/E of about 26.19 is less attractive. As a result, waiting for the price to retest the current support levels creates a more compelling opportunity.

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