Stock Analysis

At CA$18.46, Is Aecon Group Inc. (TSE:ARE) Worth Looking At Closely?

TSX:ARE
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Aecon Group Inc. (TSE:ARE), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$21.94 and falling to the lows of CA$18.46. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Aecon Group's current trading price of CA$18.46 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Aecon Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Aecon Group

What's the opportunity in Aecon Group?

Great news for investors – Aecon Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.63x is currently well-below the industry average of 27.05x, meaning that it is trading at a cheaper price relative to its peers. Aecon Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Aecon Group look like?

earnings-and-revenue-growth
TSX:ARE Earnings and Revenue Growth October 30th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Aecon Group, it is expected to deliver a negative earnings growth of -8.2%, 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? Although ARE is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to ARE, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on ARE for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Aecon Group has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Aecon Group, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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