Should You Investigate Construcciones y Auxiliar de Ferrocarriles, S.A. (BME:CAF) At €51.30?

Construcciones y Auxiliar de Ferrocarriles, S.A. (BME:CAF), 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 BME. The company is inching closer to its yearly highs following the recent share price climb. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Construcciones y Auxiliar de Ferrocarriles’s outlook and valuation to see if the opportunity still exists.

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What's The Opportunity In Construcciones y Auxiliar de Ferrocarriles?

According to our 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, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Construcciones y Auxiliar de Ferrocarriles’s ratio of 14.15x is trading slightly above its industry peers’ ratio of 13.98x, which means if you buy Construcciones y Auxiliar de Ferrocarriles today, you’d be paying a relatively reasonable price for it. And if you believe Construcciones y Auxiliar de Ferrocarriles 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. Although, there may be an opportunity to buy in the future. This is because Construcciones y Auxiliar de Ferrocarriles’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.

See our latest analysis for Construcciones y Auxiliar de Ferrocarriles

What does the future of Construcciones y Auxiliar de Ferrocarriles look like?

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. With profit expected to grow by 64% over the next couple of years, the future seems bright for Construcciones y Auxiliar de Ferrocarriles. 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 CAF’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 financial strength of the company. Have these factors changed since the last time you looked at CAF? 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 CAF, 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 CAF, 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.

If you want to dive deeper into Construcciones y Auxiliar de Ferrocarriles, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Construcciones y Auxiliar de Ferrocarriles.

If you are no longer interested in Construcciones y Auxiliar de Ferrocarriles, 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.