Is It Time To Consider Buying Balfour Beatty plc (LON:BBY)?

Balfour Beatty plc (LON:BBY), is not the largest company out there, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£3.19 and falling to the lows of UK£2.89. 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 Balfour Beatty's current trading price of UK£3.17 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Balfour Beatty’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Balfour Beatty

Is Balfour Beatty still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Balfour Beatty today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £3.78, then there’s not much of an upside to gain from mispricing. What's more, Balfour Beatty’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Balfour Beatty generate?

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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Balfour Beatty. 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 BBY’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 financial strength of the company. 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 tabs on BBY, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

So while earnings quality is important, it's equally important to consider the risks facing Balfour Beatty at this point in time. Our analysis shows 3 warning signs for Balfour Beatty (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing.

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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.
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