Is It Time To Consider Buying Per Aarsleff Holding A/S (CPH:PAAL B)?

Per Aarsleff Holding A/S (CPH:PAAL B), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the CPSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Per Aarsleff Holding’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Per Aarsleff Holding

What's The Opportunity In Per Aarsleff Holding?

The share price seems sensible at the moment 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 Per Aarsleff Holding’s ratio of 10.77x is trading slightly below its industry peers’ ratio of 11.26x, which means if you buy Per Aarsleff Holding today, you’d be paying a reasonable price for it. And if you believe that Per Aarsleff Holding should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Per Aarsleff Holding’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Per Aarsleff Holding look like?

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. Though in the case of Per Aarsleff Holding, it is expected to deliver a relatively unexciting earnings growth of 5.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Per Aarsleff Holding, at least in the near term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in PAAL B’s growth 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 PAAL B? 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 an eye on PAAL B, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Per Aarsleff Holding at this point in time. At Simply Wall St, we found 1 warning sign for Per Aarsleff Holding and we think they deserve your attention.

If you are no longer interested in Per Aarsleff Holding, 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.