Is It Time To Consider Buying Fomento de Construcciones y Contratas, S.A. (BME:FCC)?

While Fomento de Construcciones y Contratas, S.A. (BME:FCC) might not have the largest market cap around , it saw a decent share price growth of 15% on the BME over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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? Let’s examine Fomento de Construcciones y Contratas’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Fomento de Construcciones y Contratas

Is Fomento de Construcciones y Contratas Still Cheap?

Great news for investors – Fomento de Construcciones y Contratas is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. 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 Fomento de Construcciones y Contratas’s ratio of 10.19x is below its peer average of 26.36x, which indicates the stock is trading at a lower price compared to the Construction industry. 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.

Can we expect growth from Fomento de Construcciones y Contratas?

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. However, with a relatively muted profit growth of 1.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Fomento de Construcciones y Contratas, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since FCC is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on FCC for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FCC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

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. Case in point: We've spotted 3 warning signs for Fomento de Construcciones y Contratas you should be aware of.

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.