Severfield plc (LSE:SFR), a construction company based in United Kingdom, received a lot of attention from a substantial price movement on the LSE in the over the last few months, increasing to £0.86 at one point, and dropping to the lows of £0.72. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Severfield’s current trading price of £0.74 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Severfield’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 Severfield
Is Severfield still cheap?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.70% below my intrinsic value, which means if you buy Severfield today, you’d be paying a fair price for it. And if you believe that the stock is really worth £0.79, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, it seems like Severfield’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Severfield 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. Though in the case of Severfield, it is expected to deliver a relatively unexciting earnings growth of 4.50%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in SFR’s future 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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SFR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Severfield. You can find everything you need to know about Severfield in the latest infographic research report. If you are no longer interested in Severfield, you can use our free platform to see my list of over 50 other stocks with a high growth potential.