Stock Analysis

Why Bilfinger SE (ETR:GBF) Could Be Worth Watching

XTRA:GBF
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Bilfinger SE (ETR:GBF), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the XTRA. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Bilfinger’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Bilfinger

Is Bilfinger still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Bilfinger’s ratio of 11.22x is trading slightly below its industry peers’ ratio of 15.39x, which means if you buy Bilfinger today, you’d be paying a decent price for it. And if you believe Bilfinger should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Bilfinger’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Bilfinger?

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XTRA:GBF Earnings and Revenue Growth July 4th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 25% over the next couple of years, the future seems bright for Bilfinger. 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? It seems like the market has already priced in GBF’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at GBF? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on GBF, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for GBF, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Bilfinger at this point in time. While conducting our analysis, we found that Bilfinger has 3 warning signs and it would be unwise to ignore them.

If you are no longer interested in Bilfinger, 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.