What Does Taylor Wimpey plc's (LON:TW.) Share Price Indicate?

Taylor Wimpey plc (LON:TW.), 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£1.83 and falling to the lows of UK£1.48. 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 Taylor Wimpey's current trading price of UK£1.55 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 Taylor Wimpey’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 Taylor Wimpey

Is Taylor Wimpey still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 19% below my intrinsic value, which means if you buy Taylor Wimpey today, you’d be paying a fair price for it. And if you believe that the stock is really worth £1.90, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Taylor Wimpey’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 Taylor Wimpey?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Taylor Wimpey's earnings over the next few years are expected to increase by 59%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? TW.’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 financial strength of the company. 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 TW., 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Taylor Wimpey you should know about.

If you are no longer interested in Taylor Wimpey, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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