When Should You Buy Aeroports de Paris SA (EPA:ADP)?

Today we're going to take a look at the well-established Aeroports de Paris SA (EPA:ADP). The company's stock saw significant share price movement during recent months on the ENXTPA, rising to highs of €122 and falling to the lows of €108. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Aeroports de Paris' current trading price of €108 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Aeroports de Paris’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Aeroports de Paris

Is Aeroports de Paris Still Cheap?

According to our 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, 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 Aeroports de Paris’s ratio of 13.95x is trading slightly below its industry peers’ ratio of 16.55x, which means if you buy Aeroports de Paris today, you’d be paying a decent price for it. And if you believe Aeroports de Paris should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Aeroports de Paris’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Aeroports de Paris?

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 -7.1% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aeroports de Paris. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? ADP seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ADP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ADP for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on ADP should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Aeroports de Paris has 2 warning signs (and 1 which is potentially serious) we think you should know about.

If you are no longer interested in Aeroports de Paris, 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.