Is Bouygues SA (EPA:EN) Potentially Undervalued?

Let's talk about the popular Bouygues SA (EPA:EN). The company's shares maintained its current share price over the past couple of month on the ENXTPA, with a relatively tight range of €30.24 to €33.20. However, does this price actually reflect the true value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bouygues’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Bouygues

What Is Bouygues Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Bouygues’s ratio of 12.14x is trading in-line with its industry peers’ ratio, which means if you buy Bouygues today, you’d be paying a relatively sensible price for it. Furthermore, Bouygues’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Bouygues 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. Bouygues' earnings over the next few years are expected to increase by 50%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in EN’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at EN? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on EN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EN, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Bouygues, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Bouygues, and understanding them should be part of your investment process.

If you are no longer interested in Bouygues, 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.