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Kier Group plc (LON:KIE), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£1.55 at one point, and dropping to the lows of UK£1.17. 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 Kier Group's current trading price of UK£1.17 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Kier Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Kier Group Worth?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Kier Group’s ratio of 10.17x is trading slightly below its industry peers’ ratio of 10.72x, which means if you buy Kier Group today, you’d be paying a decent 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 over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Kier Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Check out our latest analysis for Kier Group
What kind of growth will Kier Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 55% over the next couple of years, the future seems bright for Kier Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.