At CA$24.91, Is It Time To Put SNC-Lavalin Group Inc. (TSE:SNC) On Your Watch List?

SNC-Lavalin Group Inc. (TSE:SNC), might not be a large cap stock, but it led the TSX gainers with a relatively large price hike in the past couple of weeks. 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. However, what if the stock is still a bargain? Let’s take a look at SNC-Lavalin Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for SNC-Lavalin Group

Is SNC-Lavalin Group still cheap?

Great news for investors – SNC-Lavalin Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 1.91x is currently well-below the industry average of 17.91x, meaning that it is trading at a cheaper price relative to its peers. However, given that SNC-Lavalin Group’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of SNC-Lavalin Group 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. Though in the case of SNC-Lavalin Group, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although SNC is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SNC, 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 an eye on SNC for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, 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. While conducting our analysis, we found that SNC-Lavalin Group has 3 warning signs and it would be unwise to ignore them.

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

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.