Is Peab AB (publ) (STO:PEAB B) Potentially Undervalued?

While Peab AB (publ) (STO:PEAB B) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the OM, rising to highs of kr98.65 and falling to the lows of kr69.65. 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 Peab's current trading price of kr73.85 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 Peab’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Peab

Is Peab still cheap?

Great news for investors – Peab is still trading at a fairly cheap price 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 Peab’s ratio of 8.9x is below its peer average of 26.01x, which indicates the stock is trading at a lower price compared to the Construction industry. Peab’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Peab generate?

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 4.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Peab, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since PEAB B is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. 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 PEAB B for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy PEAB B. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about Peab as a business, it's important to be aware of any risks it's facing. For example, Peab has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.