Why Fomento de Construcciones y Contratas, S.A. (BME:FCC) Could Be Worth Watching

Fomento de Construcciones y Contratas, S.A. (BME:FCC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the BME over the last few months. 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? 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.

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. According to my valuation, the intrinsic value for the stock is €14.96, but it is currently trading at €11.26 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 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 relatively muted profit growth of 3.5% 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 undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on FCC for a while, now might be the time to enter the stock. Its future 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 buy.

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 a bit unpleasant!) and we strongly recommend you look at them 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.

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.

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