Stock Analysis

What Does Ashtead Group plc's (LON:AHT) Share Price Indicate?

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LSE:AHT
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Today we're going to take a look at the well-established Ashtead Group plc (LON:AHT). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Ashtead Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Ashtead Group

What's the opportunity in Ashtead Group?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 4.5% below my intrinsic value, which means if you buy Ashtead Group today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £58.76, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Ashtead Group’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.

Can we expect growth from Ashtead Group?

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LSE:AHT Earnings and Revenue Growth August 28th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 61% over the next couple of years, the future seems bright for Ashtead Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AHT’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on AHT, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Ashtead Group has 2 warning signs and it would be unwise to ignore these.

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