Stock Analysis

What Does Savills plc's (LON:SVS) Share Price Indicate?

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LSE:SVS
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Savills plc (LON:SVS), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£14.31 at one point, and dropping to the lows of UK£12.91. 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 Savills' current trading price of UK£13.34 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 Savills’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Savills

Is Savills still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Savills’s ratio of 16.74x is trading slightly above its industry peers’ ratio of 12.51x, which means if you buy Savills today, you’d be paying a relatively reasonable price for it. And if you believe Savills should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Savills’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Savills generate?

earnings-and-revenue-growth
LSE:SVS Earnings and Revenue Growth November 29th 2021

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. However, with a relatively muted profit growth of 3.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Savills, at least in the short term.

What this means for you:

Are you a shareholder? SVS’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 SVS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on SVS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.

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

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