Latest news with #GallifordTryHoldings
Yahoo
a day ago
- Business
- Yahoo
Should You Investigate Galliford Try Holdings plc (LON:GFRD) At UK£4.14?
Galliford Try Holdings plc (LON:GFRD), is not the largest company out there, but it received a lot of attention from a substantial price increase on the LSE over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let's take a look at Galliford Try Holdings's outlook and value based on the most recent financial data to see if the opportunity still exists. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Good news, investors! Galliford Try Holdings is still a bargain right now. Our valuation model shows that the intrinsic value for the stock is £6.68, but it is currently trading at UK£4.14 on the share market, meaning that there is still an opportunity to buy now. Galliford Try Holdings's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range. View our latest analysis for Galliford Try Holdings 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. 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. Though in the case of Galliford Try Holdings, it is expected to deliver a negative earnings growth of -19%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term. Are you a shareholder? Although GFRD is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to GFRD, or whether diversifying into another stock may be a better move for your total risk and return. Are you a potential investor? If you've been keeping tabs on GFRD for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 2 warning signs we've spotted with Galliford Try Holdings (including 1 which is significant). If you are no longer interested in Galliford Try Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
Yahoo
23-05-2025
- Business
- Yahoo
Are Investors Undervaluing Galliford Try Holdings plc (LON:GFRD) By 40%?
Galliford Try Holdings' estimated fair value is UK£6.96 based on 2 Stage Free Cash Flow to Equity Current share price of UK£4.16 suggests Galliford Try Holdings is potentially 40% undervalued Our fair value estimate is 46% higher than Galliford Try Holdings' analyst price target of UK£4.76 Does the May share price for Galliford Try Holdings plc (LON:GFRD) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by taking the expected future cash flows and discounting them to their present value. The Discounted Cash Flow (DCF) model is the tool we will apply to do this. There's really not all that much to it, even though it might appear quite complex. Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. Generally we assume that a dollar today is more valuable than a dollar in the future, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Levered FCF (£, Millions) UK£33.4m UK£38.1m UK£40.2m UK£41.3m UK£42.4m UK£43.4m UK£44.5m UK£45.7m UK£46.8m UK£48.0m Growth Rate Estimate Source Analyst x5 Analyst x5 Analyst x5 Est @ 2.59% Est @ 2.57% Est @ 2.56% Est @ 2.56% Est @ 2.55% Est @ 2.55% Est @ 2.55% Present Value (£, Millions) Discounted @ 8.1% UK£30.9 UK£32.6 UK£31.8 UK£30.2 UK£28.6 UK£27.2 UK£25.8 UK£24.4 UK£23.2 UK£22.0 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = UK£277m We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.5%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 8.1%. Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = UK£48m× (1 + 2.5%) ÷ (8.1%– 2.5%) = UK£881m Present Value of Terminal Value (PVTV)= TV / (1 + r)10= UK£881m÷ ( 1 + 8.1%)10= UK£403m The total value is the sum of cash flows for the next ten years plus the discounted terminal value, which results in the Total Equity Value, which in this case is UK£680m. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of UK£4.2, the company appears quite undervalued at a 40% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Galliford Try Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.1%, which is based on a levered beta of 1.090. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Galliford Try Holdings Strength Earnings growth over the past year exceeded the industry. Currently debt free. Dividends are covered by earnings and cash flows. Weakness Dividend is low compared to the top 25% of dividend payers in the Construction market. Opportunity Trading below our estimate of fair value by more than 20%. Threat Annual earnings are forecast to decline for the next 3 years. Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. What is the reason for the share price sitting below the intrinsic value? For Galliford Try Holdings, we've put together three relevant items you should further examine: Risks: You should be aware of the 2 warning signs for Galliford Try Holdings (1 is a bit unpleasant!) we've uncovered before considering an investment in the company. Future Earnings: How does GFRD's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the LSE every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
