U.S. markets open in 4 hours 55 minutes
  • S&P Futures

    4,262.75
    -18.25 (-0.43%)
     
  • Dow Futures

    33,602.00
    -116.00 (-0.34%)
     
  • Nasdaq Futures

    13,519.75
    -58.00 (-0.43%)
     
  • Russell 2000 Futures

    2,006.20
    -10.70 (-0.53%)
     
  • Crude Oil

    90.05
    -2.04 (-2.22%)
     
  • Gold

    1,801.40
    -14.10 (-0.78%)
     
  • Silver

    20.48
    -0.22 (-1.05%)
     
  • EUR/USD

    1.0232
    -0.0025 (-0.25%)
     
  • 10-Yr Bond

    2.8490
    0.0000 (0.00%)
     
  • Vix

    20.82
    +0.62 (+3.07%)
     
  • GBP/USD

    1.2096
    -0.0042 (-0.35%)
     
  • USD/JPY

    133.3690
    -0.1110 (-0.08%)
     
  • BTC-USD

    24,038.86
    -803.93 (-3.24%)
     
  • CMC Crypto 200

    571.10
    -0.18 (-0.03%)
     
  • FTSE 100

    7,514.81
    +13.92 (+0.19%)
     
  • Nikkei 225

    28,871.78
    +324.80 (+1.14%)
     

Have Investors Priced In Severn Trent Plc’s (LON:SVT) Growth?

  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Severn Trent Plc (LSE:SVT), a water utilities company based in United Kingdom, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £21.62 and falling to the lows of £17.03. 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 Severn Trent’s current trading price of £17.98 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 Severn Trent’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Severn Trent

Is Severn Trent still cheap?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Severn Trent’s ratio of 14.48x is trading slightly In addition to this, it seems like Severn Trent’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 Severn Trent look like?

LSE:SVT Future Profit Mar 14th 18
LSE:SVT Future Profit Mar 14th 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 profit growth of 6.49% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Severn Trent, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in SVT’s growth outlook, 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 SVT? 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 SVT, 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 Severn Trent. You can find everything you need to know about Severn Trent in the latest infographic research report. If you are no longer interested in Severn Trent, 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.