When Should You Buy Bellway p.l.c. (LON:BWY)?

While Bellway p.l.c. (LON:BWY) might not be the most widely known stock at the moment, it maintained its current share price over the past couple of month on the LSE, with a relatively tight range of UK£31.18 to UK£34.05. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bellway’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Bellway

What's the opportunity in Bellway?

According to my valuation model, Bellway seems to be fairly priced at around 0.2% below my intrinsic value, which means if you buy Bellway today, you’d be paying a fair price for it. And if you believe that the stock is really worth £32.39, 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 Bellway’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 Bellway look like?

earnings-and-revenue-growth

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. 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 31% over the next couple of years, the future seems bright for Bellway. 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? BWY’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 financial strength of the company. 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 BWY, now may not be the most advantageous 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Bellway at this point in time. Case in point: We've spotted 2 warning signs for Bellway you should be aware of.

If you are no longer interested in Bellway, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.