Is It Too Late to Consider AtkinsRéalis After Its Big Multi Year Share Price Surge?

• If you have been wondering whether AtkinsRéalis Group is still good value after its huge run up, you are not alone. This stock has become a favorite talking point for investors trying to separate momentum from true underlying worth.
• Even after pulling back around 11.4% over the last month and slipping 0.4% in the past week, the share price is still up 16.0% year to date, 13.2% over the last year and an impressive 254.5% over three years and 279.4% over five years. This naturally raises the question of how much upside is realistically left.
• Recent headlines have focused on AtkinsRéalis Group sharpening its focus on core engineering and infrastructure operations, while continuing to distance itself from legacy issues that once weighed on sentiment. This shift in narrative has helped fuel the longer term rerating, even if the stock has paused recently as investors digest what the new strategy means for future growth and risk.
• On our valuation framework the company scores a solid 5 out of 6 for being undervalued across key checks. Next we will walk through those valuation approaches and why they may still not be the most complete way to understand what this business could be worth.

AtkinsRéalis Group delivered 13.2% returns over the last year. See how this stacks up to the rest of the Construction industry.

Approach 1: AtkinsRéalis Group Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back to today in order to account for risk and the time value of money.

For AtkinsRéalis Group, the latest twelve month Free Cash Flow is about CA$216.3 Million. Analysts expect this to rise sharply, with Simply Wall St’s 2 Stage Free Cash Flow to Equity model projecting Free Cash Flow of roughly CA$1.17 Billion by 2035, based on a blend of analyst forecasts for the next few years and then gradually slowing growth assumptions thereafter.

When all those projected cash flows are discounted back to today, the model arrives at an intrinsic value of about CA$105.65 per share. Compared with the current market price, this implies the stock is trading at roughly a 17.9% discount, which indicates investors may not yet be fully pricing in the company’s future cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests AtkinsRéalis Group is undervalued by 17.9%. Track this in your watchlist or portfolio, or discover 919 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for AtkinsRéalis Group.

Approach 2: AtkinsRéalis Group Price vs Earnings

For consistently profitable businesses, the price to earnings ratio is often the most intuitive way to judge value because it links what investors pay today directly to the profits the company is generating. In general, faster growing and less risky companies can justify a higher PE multiple, while slower growth or higher uncertainty tends to pull a fair multiple lower.

AtkinsRéalis Group currently trades on a PE of about 5.56x, which is well below both the Construction industry average of around 15.23x and the broader peer average of roughly 28.06x. Simply Wall St’s proprietary Fair Ratio framework estimates what a reasonable PE should be for this specific company, given its earnings growth outlook, profitability, industry, market cap and risk profile. For AtkinsRéalis Group, that Fair Ratio comes out at about 9.42x.

Because the Fair Ratio is tailored to the company’s fundamentals rather than blunt comparisons with peers, it provides a more nuanced view of value. With the current PE of 5.56x sitting materially below the 9.42x Fair Ratio, the shares appear attractively priced on an earnings basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your AtkinsRéalis Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page that lets you tell the story behind your numbers by linking your view of a company’s future revenue, earnings and margins to a transparent forecast and Fair Value that updates dynamically as new news or earnings arrive. This helps you quickly compare that Fair Value to today’s price so you can decide whether to buy, hold or sell. Your Narrative for AtkinsRéalis Group might look more like the bullish scenario that sees strong nuclear, infrastructure and margin upside justifying a Fair Value closer to the top analyst target of about CA$124, or it may reflect a more cautious view that focuses on project delays, margin risk and slower growth and lands nearer the lower target of roughly CA$95.

Do you think there's more to the story for AtkinsRéalis Group? Head over to our Community to see what others are saying!

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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