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Why Ashtead Group plc (LON:AHT) Could Be Worth Watching

Simply Wall St

Ashtead Group plc (LON:AHT) saw a decent share price growth in the teens level on the LSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Ashtead Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Ashtead Group

What's the opportunity in Ashtead Group?

Great news for investors – Ashtead Group is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is £37.87, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Ashtead Group’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Ashtead Group look like?

LSE:AHT Past and Future Earnings, January 1st 2020

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 9.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Ashtead Group, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since AHT is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on AHT for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy AHT. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

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

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.

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. Thank you for reading.