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FirstGroup plc (LON:FGP), is not the largest company out there, but it received a lot of attention from a substantial price increase on the LSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine FirstGroup’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for FirstGroup
Is FirstGroup Still Cheap?
Good news, investors! FirstGroup is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 FirstGroup’s ratio of 10.31x is below its peer average of 13x, which indicates the stock is trading at a lower price compared to the Transportation industry. Although, there may be another chance to buy again in the future. This is because FirstGroup’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.
Can we expect growth from FirstGroup?
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. FirstGroup's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since FGP is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on FGP for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FGP. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.