While Securitas AB (publ) (STO:SECU B) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the OM over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Securitas’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Securitas
Is Securitas 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. I’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 14.7x is currently trading slightly below its industry peers’ ratio of 14.82x, which means if you buy Securitas today, you’d be paying a decent price for it. And if you believe that Securitas should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Securitas’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Securitas 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. Securitas' earnings over the next few years are expected to increase by 43%, 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? SECU B’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 financial strength of the company. Have these factors changed since the last time you looked at SECU B? 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 SECU B, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for SECU B, 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.
If you want to dive deeper into Securitas, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Securitas (1 is a bit concerning!) that we believe deserve your full attention.
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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.
About OM:SECU B
Securitas
Provides security services in North America, Europe, Latin America, Africa, the Middle East, Asia, and Australia.
Reasonable growth potential slight.