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Kier Group plc (LON:KIE), which is in the construction business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the LSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Kier Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Kier Group
What is Kier Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. 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 5.86x is currently trading slightly below its industry peers’ ratio of 9.56x, which means if you buy Kier Group today, you’d be paying a reasonable price for it. And if you believe that Kier Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like Kier Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Kier Group 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. Kier Group’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? KIE’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 KIE? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on KIE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for KIE, 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.