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Is Now The Time To Look At Buying PLC S.p.A. (BIT:PLC)?

Simply Wall St

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PLC S.p.A. (BIT:PLC), which is in the construction business, and is based in Italy, received a lot of attention from a substantial price movement on the BIT over the last few months, increasing to €1.8 at one point, and dropping to the lows of €1.54. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PLC's current trading price of €1.59 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PLC’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 PLC

What is PLC worth?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that PLC’s ratio of 7.61x is trading slightly below its industry peers’ ratio of 10.8x, which means if you buy PLC today, you’d be paying a reasonable price for it. And if you believe that PLC should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, PLC’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of PLC look like?

BIT:PLC Past and Future Earnings, June 26th 2019

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. With revenues expected to grow by 53% over the next couple of years, the future seems bright for PLC. If the level of expenses is able to be maintained, it looks like higher cash flow 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 already priced in PLC’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 track record of its management team. Have these factors changed since the last time you looked at PLC? 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 PLC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for PLC, 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.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.