Yahoo Finance Is It Too Late To Consider Buying Ashtead Group plc (LON:AHT)?
Today we're going to take a look at the well-established Ashtead Group plc (LON:AHT). The company's stock received a lot of attention from a substantial price increase on the LSE over the last few months. 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, what if the stock is still a bargain? Let’s examine Ashtead Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Ashtead Group
What is Ashtead Group worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.63x is currently trading slightly above its industry peers’ ratio of 25.49x, which means if you buy Ashtead Group today, you’d be paying a relatively sensible price for it. And if you believe that Ashtead Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Ashtead Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
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 46% 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? It seems like the market has already priced in AHT’s positive outlook, with shares trading around industry price multiples. 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 AHT? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on AHT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AHT, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Ashtead Group as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Ashtead Group and we think they deserve your attention.
If you are no longer interested in Ashtead Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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