Yahoo Finance Is It Too Late To Consider 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, saw significant share price volatility over the past couple of months on the LSE, rising to the highs of £73.45 and falling to the lows of £61.15. 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 Spirax-Sarco Engineering’s current trading price of £61.3 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.
See our latest analysis for Spirax-Sarco Engineering
What is Spirax-Sarco Engineering worth?
Spirax-Sarco Engineering is currently overpriced based on my relative valuation model. 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 25.88x is currently well-above the industry average of 18.82x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Spirax-Sarco Engineering’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Spirax-Sarco Engineering?
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. However, with a relatively muted profit growth of 9.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Spirax-Sarco Engineering, at least in the short term.
What this means for you:
Are you a shareholder? SPX’s future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe SPX should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 positive growth outlook may mean 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
