Assessing Veidekke’s (OB:VEI) Valuation Following Steady Gains and Positive Shareholder Returns

Veidekke (OB:VEI) stock has shown a small gain of 0.8% at the close, capping off a steady week with a 2% increase. Investors may be weighing these moves against its longer-term share performance.

See our latest analysis for Veidekke.

While Veidekke’s share price has edged down slightly over the past three months, the stock has maintained positive momentum overall this year, and long-term investors have seen impressive gains. Its total shareholder return stands at 36% over the past year and an outstanding 133% over three years. This trajectory suggests that the market’s confidence in the company has been building, reflecting both recent results and a heightened outlook on growth potential.

If you’re looking to spot other standouts with similar momentum, this is a perfect time to broaden your search and discover fast growing stocks with high insider ownership

Now that Veidekke shares have posted solid long-term gains, the question for investors is whether the stock is currently undervalued and set for further upside, or if robust future growth is already reflected in its price.

Price-to-Earnings of 16.9x: Is it justified?

Veidekke is trading at a price-to-earnings (P/E) ratio of 16.9x, higher than both the peer average and the broader European construction sector. This suggests the market places a premium on its earnings potential.

The P/E ratio compares a company's current share price to its per-share earnings. It serves as a common yardstick for how the market values profitability. For construction firms, a higher P/E may imply belief in stable or growing profits, or simply optimism on the company’s future prospects relative to its peers.

Despite the premium, Veidekke's P/E of 16.9x stands above the peer average of 16.1x and the sector average of 15x. This signals the market is willing to pay more for each krone of earnings than the industry norm. This could potentially reflect recent share price strength or confidence in management and strategies.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 16.9x (OVERVALUED)

However, slower revenue growth or missing analyst expectations could temper recent optimism and prompt a pullback in Veidekke’s share price.

Find out about the key risks to this Veidekke narrative.

Another View: Deep Discount by DCF

While the price-to-earnings ratio presents Veidekke as expensive compared to peers, our DCF model suggests a very different story. With shares trading 63% below our calculated fair value, the market may be overlooking potential upside. Is this a rare opportunity, or does it indicate hidden risks?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Veidekke for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Veidekke Narrative

If you have a different perspective or prefer to dig into the numbers yourself, you can build a custom narrative for Veidekke in just a few minutes. Do it your way

A great starting point for your Veidekke research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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