Stock Analysis

What Does SNC-Lavalin Group Inc.'s (TSE:SNC) Share Price Indicate?

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TSX:SNC
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SNC-Lavalin Group Inc. (TSE:SNC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the TSX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine SNC-Lavalin Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for SNC-Lavalin Group

Is SNC-Lavalin Group still cheap?

According to my valuation model, SNC-Lavalin Group seems to be fairly priced at around 19% below my intrinsic value, which means if you buy SNC-Lavalin Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth CA$28.40, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that SNC-Lavalin Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from SNC-Lavalin Group?

earnings-and-revenue-growth
TSX:SNC Earnings and Revenue Growth January 25th 2021

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. 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 SNC-Lavalin Group, it is expected to deliver a negative revenue growth of -6.5% over the next couple of years, 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? SNC seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial 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 an eye on SNC 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. In addition to this, 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 SNC should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that SNC-Lavalin Group has 1 warning sign and it would be unwise to ignore this.

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