At €94.85, Is It Time To Put Aeroports de Paris SA (EPA:ADP) On Your Watch List?

Let's talk about the popular Aeroports de Paris SA (EPA:ADP). The company's shares received a lot of attention from a substantial price increase on the ENXTPA 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Aeroports de Paris’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Aeroports de Paris

What is Aeroports de Paris worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Aeroports de Paris’s ratio of 17.61x is trading slightly above its industry peers’ ratio of 13.84x, which means if you buy Aeroports de Paris today, you’d be paying a relatively sensible price for it. And if you believe Aeroports de Paris should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Aeroports de Paris’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

Can we expect growth from Aeroports de Paris?

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. Though in the case of Aeroports de Paris, it is expected to deliver a negative earnings growth of -14%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? ADP seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ADP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ADP for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ADP should the price fluctuate below the industry PE ratio.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Aeroports de Paris. You can find everything you need to know about Aeroports de Paris in the latest infographic research report. If you are no longer interested in Aeroports de Paris, you can use our free platform to see my 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. 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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