Strabag SE (VIE:STR), which is in the construction business, and is based in Austria, saw a decent share price growth in the teens level on the WBAG over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. 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.
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What is Strabag worth?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.26% above my intrinsic value, which means if you buy Strabag today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €28.57, there’s only an insignificant downside when the price falls to its real value. In addition to this, Strabag has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will Strabag generate?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 negative profit growth of -20% 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? Currently, STR appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on STR for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, 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 STR should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Strabag. You can find everything you need to know about Strabag in the latest infographic research report. If you are no longer interested in Strabag, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.