Yahoo Finance Is Now The Time To Look At Buying Spirax-Sarco Engineering plc (LON:SPX)?
Spirax-Sarco Engineering plc (LON:SPX), which is in the machinery business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£94.15 at one point, and dropping to the lows of UK£77.75. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Spirax-Sarco Engineering's current trading price of UK£77.75 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Spirax-Sarco Engineering’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Spirax-Sarco Engineering
What's the opportunity in Spirax-Sarco Engineering?
Spirax-Sarco Engineering is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Spirax-Sarco Engineering’s ratio of 34.39x is above its peer average of 14.17x, which suggests the stock is trading at a higher price compared to the Machinery industry. Another thing to keep in mind is that Spirax-Sarco Engineering’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What does the future of Spirax-Sarco Engineering look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 profit expected to grow by 20% over the next couple of years, the future seems bright for Spirax-Sarco Engineering. 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 well and truly priced in SPX’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SPX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 SPX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SPX, which means it’s worth diving deeper into other factors 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 Spirax-Sarco Engineering. You can find everything you need to know about Spirax-Sarco Engineering in the latest infographic research report. If you are no longer interested in Spirax-Sarco Engineering, 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.
