Is Now The Time To Look At Buying Epiroc AB (publ) (STO:EPI A)?

Today we're going to take a look at the well-established Epiroc AB (publ) (STO:EPI A). The company's stock saw significant share price movement during recent months on the OM, rising to highs of kr220 and falling to the lows of kr194. 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 Epiroc's current trading price of kr206 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Epiroc’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 Epiroc

Is Epiroc 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 Epiroc’s ratio of 25.92x is trading slightly above its industry peers’ ratio of 22.34x, which means if you buy Epiroc today, you’d be paying a relatively sensible price for it. And if you believe that Epiroc should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Epiroc’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Epiroc look like?

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. Epiroc's earnings over the next few years are expected to increase by 21%, 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? EPI A’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at EPI A? 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 an eye on EPI A, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for EPI A, 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.

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

If you are no longer interested in Epiroc, 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.