What Is ACS, Actividades de Construcción y Servicios, S.A.'s (BME:ACS) Share Price Doing?

ACS, Actividades de Construcción y Servicios, S.A. (BME:ACS), might not be a large cap stock, but it maintained its current share price over the past couple of month on the BME, with a relatively tight range of €22.16 to €23.96. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ACS Actividades de Construcción y Servicios’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for ACS Actividades de Construcción y Servicios

Is ACS Actividades de Construcción y Servicios 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 ACS Actividades de Construcción y Servicios’s ratio of 11.33x is trading in-line with its industry peers’ ratio, which means if you buy ACS Actividades de Construcción y Servicios today, you’d be paying a relatively reasonable price for it. Although, there may be an opportunity to buy in the future. This is because ACS Actividades de Construcción y Servicios’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 ACS Actividades de Construcción y Servicios?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. ACS Actividades de Construcción y Servicios' earnings over the next few years are expected to increase by 36%, 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? ACS’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 ACS? 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 ACS, 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 ACS, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 4 warning signs we've spotted with ACS Actividades de Construcción y Servicios (including 2 which don't sit too well with us).

If you are no longer interested in ACS Actividades de Construcción y Servicios, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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