Is Now The Time To Look At Buying Aecon Group Inc. (TSE:ARE)?

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$17.06 and falling to the lows of CA$13.49. 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$13.49 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.

Check out 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. 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 Aecon Group’s ratio of 16.23x is below its peer average of 23.17x, which indicates the stock is trading at a lower price compared to the Construction industry. What’s more interesting is that, Aecon Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Aecon Group 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. With profit expected to grow by 21% over the next year, the near-term future seems bright for Aecon Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since ARE is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on ARE for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy ARE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Aecon Group at this point in time. For example, we've found that Aecon Group has 4 warning signs (1 shouldn't be ignored!) 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.