Should You Think About Buying Travis Perkins plc (LON:TPK) Now?

Travis Perkins plc (LON:TPK), 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£12.87 and falling to the lows of UK£9.34. 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 Travis Perkins' current trading price of UK£9.34 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 Travis Perkins’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 Travis Perkins

Is Travis Perkins Still Cheap?

Good news, investors! Travis Perkins is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Travis Perkins’s ratio of 8.14x is below its peer average of 13.49x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. Although, there may be another chance to buy again in the future. This is because Travis Perkins’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 Travis Perkins?

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. However, with a relatively muted profit growth of 1.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Travis Perkins, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since TPK is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on TPK for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy TPK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 2 warning signs for Travis Perkins (1 can't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Travis Perkins, 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.