Is Fomento de Construcciones y Contratas, S.A. (BME:FCC) Potentially Undervalued?

Fomento de Construcciones y Contratas, S.A. (BME:FCC), is not the largest company out there, but it saw a decent share price growth of 18% on the BME over the last few months. 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, what if the stock is still a bargain? Let’s take a look at Fomento de Construcciones y Contratas’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Fomento de Construcciones y Contratas

What's The Opportunity In Fomento de Construcciones y Contratas?

Good news, investors! Fomento de Construcciones y Contratas is still a bargain right now. Our valuation model shows that the intrinsic value for the stock is €21.60, but it is currently trading at €14.30 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Fomento de Construcciones y Contratas’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.

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 -6.6%, 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 tabs on FCC for some time, but hesitant on making the leap, we recommend you dig deeper 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. Every company has risks, and we've spotted 2 warning signs for Fomento de Construcciones y Contratas (of which 1 is potentially serious!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com