Is Now An Opportune Moment To Examine Fomento de Construcciones y Contratas, S.A. (BME:FCC)?

Fomento de Construcciones y Contratas, S.A. (BME:FCC), is not the largest company out there, but it saw a decent share price growth in the teens level on the BME over the last few months. 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, what if the stock is still a bargain? 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

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

Good news, investors! Fomento de Construcciones y Contratas is still a bargain right now. My valuation model shows that the intrinsic value for the stock is €17.48, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Fomento de Construcciones y Contratas’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Fomento de Construcciones y Contratas look like?

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 negative profit growth of -2.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Fomento de Construcciones y Contratas. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although FCC is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher 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, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 3 warning signs for Fomento de Construcciones y Contratas (1 is potentially serious!) and we strongly recommend you look at these before investing.

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.