Is There Now An Opportunity In Spirax-Sarco Engineering plc (LSE:SPX)?
Spirax-Sarco Engineering plc (LSE:SPX), a machinery company based in United Kingdom, maintained its current share price over the past couple of month on the LSE, with a relatively tight range of £54.4 to £58.35. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SPX’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 SPX
What’s the opportunity in SPX?
SPX appears to be overvalued by 49% at the moment, based on my discounted cash flow valuation. The stock is currently priced at £56.35 on the market compared to my intrinsic value of £37.72. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that SPX’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of SPX 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. With profit expected to grow by 29.23% over the next couple of years, the future seems bright for SPX. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in SPX’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SPX should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on SPX for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for SPX, which means 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 Spirax-Sarco Engineering. You can find everything you need to know about SPX in the latest infographic research report. If you are no longer interested in Spirax-Sarco Engineering, 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.
