Should You Think About Buying FirstGroup plc (LON:FGP) Now?

FirstGroup plc (LON:FGP), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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 FirstGroup’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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Is FirstGroup Still Cheap?

Good news, investors! FirstGroup is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.41x is currently well-below the industry average of 14.89x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, FirstGroup’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

View our latest analysis for FirstGroup

What kind of growth will FirstGroup generate?

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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for FirstGroup. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since FGP is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. 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 FGP for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FGP. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

It can be quite valuable to consider what analysts expect for FirstGroup from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in FirstGroup, 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.