Is It Too Late To Consider Skanska After Contract Wins And Strong Multi Year Share Gains

• Wondering if Skanska is still good value after its run over the last few years, or if most of the upside is already priced in? This breakdown will help you decide whether to keep watching or start acting.
• The stock has climbed about 2.0% over the last week, 3.3% year to date and 9.3% over the past year, while its 3 year gain of 60.9% and 5 year gain of 44.6% show that investors have already been rewarded for backing the story.
• Recent headlines have focused on Skanska winning new infrastructure and commercial construction contracts, as well as highlighting its ongoing pivot toward projects with stronger margins and lower risk exposure. Together, these developments help explain why the market has been willing to gradually re rate the shares despite a more cautious macro backdrop.
• Even after that performance, Skanska scores a 4/6 valuation check, suggesting there could still be mispricing depending on which lens you use. Next, we will walk through the main valuation approaches, then finish with a more holistic way to judge what the stock might really be worth.

Skanska delivered 9.3% returns over the last year. See how this stacks up to the rest of the Construction industry.

Approach 1: Skanska Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting the cash it can generate in the future and then discounting those cash flows back into today’s money.

For Skanska, the model starts from last twelve month free cash flow of about SEK 7.6 billion and then uses analyst estimates and extrapolations to map the next decade. By 2026, free cash flow is projected to rise to roughly SEK 10.0 billion, easing back toward about SEK 8.7 billion by 2035 as growth matures. These longer term numbers are extrapolated from the nearer term analyst forecasts, which typically only extend five years.

On this basis, the 2 Stage Free Cash Flow to Equity model points to an intrinsic value of around SEK 369 per share. That is roughly 33.6% above the current market price implied in this analysis. This suggests the market is still applying a meaningful discount to Skanska’s cash generation potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Skanska is undervalued by 33.6%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Skanska.

Approach 2: Skanska Price vs Earnings

For profitable companies like Skanska, the price to earnings (PE) ratio is a straightforward way to see how much investors are paying for each unit of current earnings. It works well here because Skanska has a solid earnings base that the market can anchor to.

In general, faster growth and lower perceived risk justify a higher PE, while slower or more volatile earnings usually deserve a lower multiple. Skanska currently trades at about 16.4x earnings, slightly above the Construction industry average of around 15.3x but below the peer group average of roughly 19.6x. This suggests the market gives it some credit but not a full quality premium.

Simply Wall St’s Fair Ratio for Skanska is about 25.6x. This proprietary metric estimates the PE the stock should trade on after factoring in its earnings growth outlook, profitability, industry, market cap and risk profile. It is more tailored than simple peer or industry comparisons, which can miss company specific strengths or weaknesses. Comparing the Fair Ratio of 25.6x with the current 16.4x points to meaningful upside on a multiples basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Skanska Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to attach your own story about Skanska to the numbers by linking your view of its future revenue, earnings and margins to a financial forecast and then to a fair value estimate. Narratives on Simply Wall St’s Community page, used by millions of investors, make this easy and accessible by turning your assumptions into a dynamic model that compares your Fair Value with the current share price, helping you decide if Skanska looks like a buy, hold or sell right now. Because Narratives are updated automatically as new information like earnings results, contract wins or macro news comes in, your view of fair value moves with the story instead of going stale. For example, one Skanska Narrative might lean bullish and land near SEK 285 per share on expectations of stronger infrastructure demand and margin expansion, while a more cautious Narrative might sit closer to SEK 240, focusing on property market risks and slower growth.

Do you think there's more to the story for Skanska? Head over to our Community to see what others are saying!

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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