Per Aarsleff Holding A/S (CPH:PAAL B), is not the largest company out there, but it saw a decent share price growth in the teens level on the CPSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Per Aarsleff Holding’s outlook and valuation to see if the opportunity still exists.
Is Per Aarsleff Holding still cheap?
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 15.64x is trading slightly above its industry peers’ ratio of 14.35x, which means if you buy Per Aarsleff Holding today, you’d be paying a relatively sensible price for it. And if you believe Per Aarsleff Holding should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. 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.
Can we expect growth from Per Aarsleff Holding?
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. Per Aarsleff Holding's earnings over the next few years are expected to increase by 43%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? PAAL B’s optimistic future growth appears to have been factored into the current share price, 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 confidence to invest in the company should the price drop 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 advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for PAAL B, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. So feel free to check out our free graph representing analyst forecasts.
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This article by Simply Wall St is general in nature. 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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