What Does Smiths Group plc's (LON:SMIN) Share Price Indicate?

Let's talk about the popular Smiths Group plc (LON:SMIN). The company's shares saw a decent share price growth in the teens level on the LSE over the last few months. 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. However, what if the stock is still a bargain? Let’s examine Smiths Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Smiths Group

Is Smiths Group still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.86% above my intrinsic value, which means if you buy Smiths Group today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is £13.94, there’s only an insignificant downside when the price falls to its real value. What's more, Smiths Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Smiths Group?

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. Smiths Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? SMIN’s optimistic future growth appears to have been factored into the current share price, 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 tabs on SMIN, now may not be the most optimal 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Smiths Group you should know about.

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This article by Simply Wall St is general in nature. 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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