Is It Too Late To Consider Buying Strabag SE (VIE:STR)?

Strabag SE (VIE:STR), is not the largest company out there, but it led the WBAG gainers with a relatively large price hike in the past couple of weeks. 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. However, what if the stock is still a bargain? Let’s take a look at Strabag’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Strabag

What's the opportunity in Strabag?

Strabag appears to be overvalued by 26% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €35.55 on the market compared to my intrinsic value of €28.31. This means that the opportunity to buy Strabag at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Strabag’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Strabag look like?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -8.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Strabag. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe STR is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 tabs on STR for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

So while earnings quality is important, it's equally important to consider the risks facing Strabag at this point in time. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Strabag.

If you are no longer interested in Strabag, you can use our free platform to see our 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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