Is Now An Opportune Moment To Examine Worley Limited (ASX:WOR)?
While Worley Limited (ASX:WOR) might not have the largest market cap around , it saw a decent share price growth of 14% on the ASX over the last few months. The recent share price gains has brought the company back closer to its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Worley’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Worley
What's The Opportunity In Worley?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 17% below our intrinsic value, which means if you buy Worley today, you’d be paying a fair price for it. And if you believe the company’s true value is A$19.96, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Worley’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 does the future of Worley look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Worley's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in WOR’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on WOR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Worley at this point in time. While conducting our analysis, we found that Worley has 1 warning sign and it would be unwise to ignore this.
If you are no longer interested in Worley, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
