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Let's talk about the popular Ashtead Group plc (LON:AHT). The company's shares saw a decent share price growth of 19% on the LSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a large-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? Let’s take a look at Ashtead Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
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What Is Ashtead Group Worth?
According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Ashtead Group’s ratio of 16.49x is above its peer average of 13.14x, which suggests the stock is trading at a higher price compared to the Trade Distributors industry. But, is there another opportunity to buy low in the future? Given that Ashtead Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
See our latest analysis for Ashtead Group
What kind of growth will Ashtead 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. With profit expected to grow by 40% over the next couple of years, the future seems bright for Ashtead Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? AHT’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AHT should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.