At €11.26, Is Fomento de Construcciones y Contratas, S.A. (BME:FCC) Worth Looking At Closely?

While Fomento de Construcciones y Contratas, S.A. (BME:FCC) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the BME. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Fomento de Construcciones y Contratas’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Fomento de Construcciones y Contratas

What's the opportunity in Fomento de Construcciones y Contratas?

Great news for investors – Fomento de Construcciones y Contratas is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is €17.31, but it is currently trading at €11.26 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Fomento de Construcciones y Contratas’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Fomento de Construcciones y Contratas generate?

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 Fomento de Construcciones y Contratas, it is expected to deliver a negative earnings growth of -13%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although FCC is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to FCC, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on FCC for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Fomento de Construcciones y Contratas at this point in time. For example, Fomento de Construcciones y Contratas has 5 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Fomento de Construcciones y Contratas, 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.