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Is Bilfinger SE (FRA:GBF) Undervalued?

Lawrence Carr

Bilfinger SE (DB:GBF), a commercial services company based in Germany, received a lot of attention from a substantial price movement on the DB in the over the last few months, increasing to €41.14 at one point, and dropping to the lows of €33.86. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Bilfinger’s current trading price of €36.8 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bilfinger’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Bilfinger

What is Bilfinger worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.13x is currently trading slightly below its industry peers’ ratio of 2.37x, which means if you buy Bilfinger today, you’d be paying a relatively reasonable price for it. And if you believe Bilfinger should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Bilfinger’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Bilfinger look like?

DB:GBF Future Profit Mar 27th 18

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. However, with a relatively muted revenue growth of 8.61% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Bilfinger, at least in the short term.

What this means for you:

Are you a shareholder? GBF’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GBF? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on GBF, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

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

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.