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Watkin Jones Plc (LON:WJG), is not the largest company out there, but it saw a decent share price growth of 12% on the AIM over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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? Today we will analyse the most recent data on Watkin Jones’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Watkin Jones
What Is Watkin Jones Worth?
Watkin Jones appears to be overvalued by 35% at the moment, based on our discounted cash flow valuation. The stock is currently priced at UK£0.48 on the market compared to our intrinsic value of £0.36. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Watkin Jones’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.
Can we expect growth from Watkin Jones?
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 revenues expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Watkin Jones. If the level of expenses is able to be maintained, 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? WJG’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe WJG should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on WJG for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for WJG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.