Is It Time To Consider Buying Bakkavor Group plc (LON:BAKK)?

Bakkavor Group plc (LON:BAKK), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Bakkavor Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Bakkavor Group

What is Bakkavor Group worth?

According to my valuation model, Bakkavor Group seems to be fairly priced at around 7.1% below my intrinsic value, which means if you buy Bakkavor Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £1.37, then there’s not much of an upside to gain from mispricing. Furthermore, Bakkavor Group’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Bakkavor 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. Bakkavor Group's earnings over the next few years are expected to increase by 33%, 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? It seems like the market has already priced in BAKK’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 an eye on BAKK, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 while earnings quality is important, it's equally important to consider the risks facing Bakkavor Group at this point in time. While conducting our analysis, we found that Bakkavor Group has 2 warning signs and it would be unwise to ignore them.

If you are no longer interested in Bakkavor Group, 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.