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What Does G4S plc's (LON:GFS) Share Price Indicate?

Simply Wall St

G4S plc (LON:GFS), which is in the commercial services business, and is based in United Kingdom, received a lot of attention from a substantial price increase on the LSE over the last few months. 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 G4S’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for G4S

What's the opportunity in G4S?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.2% below my intrinsic value, which means if you buy G4S today, you’d be paying a fair price for it. And if you believe that the stock is really worth £2.09, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, G4S’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of G4S look like?

LSE:GFS Past and Future Earnings, December 6th 2019

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. G4S’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in GFS’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 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 an eye on GFS, 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 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 G4S. You can find everything you need to know about G4S in the latest infographic research report. If you are no longer interested in G4S, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.