Lendlease Group (ASX:LLC), is not the largest company out there, but it led the ASX gainers with a relatively large price hike in the past couple of weeks. 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 Lendlease Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Lendlease Group worth?
According to my valuation model, Lendlease Group seems to be fairly priced at around 20% below my intrinsic value, which means if you buy Lendlease Group today, you’d be paying a fair price for it. And if you believe the company’s true value is A$18.20, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Lendlease Group has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Lendlease Group?
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. Lendlease Group's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in LLC’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 an eye on LLC, 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 the company, 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.
If you'd like to know more about Lendlease Group as a business, it's important to be aware of any risks it's facing. For example - Lendlease Group has 4 warning signs we think you should be aware of.
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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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