Posted on November 20, 2018
Arcadis NV (AMS:ARCAD), which is in the construction business, and is based in Netherlands, saw significant share price volatility over the past couple of months on the ENXTAM, rising to the highs of €15.79 and falling to the lows of €10.93. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Arcadis’s current trading price of €12 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 Arcadis’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Arcadis still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.53% above my intrinsic value, which means if you buy Arcadis today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth €11.7, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Arcadis’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 Arcadis look like?
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 74% over the next couple of years, the future seems bright for Arcadis. 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? It seems like the market has already priced in ARCAD’s positive outlook, 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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on ARCAD, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Arcadis. You can find everything you need to know about Arcadis in the latest infographic research report. If you are no longer interested in Arcadis, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
Source: Simply Wall St
