While Balfour Beatty plc (LON:BBY) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Balfour Beatty’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Balfour Beatty worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.92% above my intrinsic value, which means if you buy Balfour Beatty today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £2.43, there’s only an insignificant downside when the price falls to its real value. What's more, Balfour Beatty’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will Balfour Beatty generate?
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. Balfour Beatty's earnings over the next few years are expected to increase by 94%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? BBY’s optimistic 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 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 an eye on BBY, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Balfour Beatty (including 1 which is significant).
If you are no longer interested in Balfour Beatty, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. 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.
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