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Breedon Group plc (LON:BREE), is not the largest company out there, but it saw a decent share price growth of 18% on the LSE over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. With many analysts covering the mid-cap 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 Breedon Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Breedon Group
What Is Breedon Group Worth?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 5.0% below our intrinsic value, which means if you buy Breedon Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £5.03, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Breedon 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Breedon Group look like?
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. Breedon Group's earnings over the next few years are expected to increase by 64%, 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? BREE’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 track record of its management team. Have these factors changed since the last time you looked at the stock? 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 BREE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.