U.S. Markets closed

Is Bakkavor Group plc (LON:BAKK) Potentially Undervalued?

Simply Wall St

Bakkavor Group plc (LON:BAKK), which is in the food business, and is based in United Kingdom, saw a significant share price rise of over 20% in the past couple of months on the LSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Bakkavor Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Bakkavor Group

Is Bakkavor Group still cheap?

Great news for investors – Bakkavor Group is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £2.71, but it is currently trading at UK£1.39 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Bakkavor Group’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 Bakkavor Group generate?

LSE:BAKK Past and Future Earnings, January 18th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 profit expected to grow by 97% over the next couple of years, the future seems bright for Bakkavor Group. 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:

Are you a shareholder? Since BAKK is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on BAKK for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy BAKK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Bakkavor Group. You can find everything you need to know about Bakkavor Group in the latest infographic research report. If you are no longer interested in Bakkavor Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.