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Is Now An Opportune Moment To Examine Travis Perkins plc (LON:TPK)?

Travis Perkins plc (LON:TPK), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£10.54 and falling to the lows of UK£8.05. 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 Travis Perkins' current trading price of UK£8.39 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Travis Perkins’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 Travis Perkins

Is Travis Perkins Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11% below my intrinsic value, which means if you buy Travis Perkins today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £9.46, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Travis Perkins’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Travis Perkins?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 1.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Travis Perkins, at least in the short term.

What This Means For You

Are you a shareholder? TPK’s future growth appears to have been factored into the current share price, 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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on TPK, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Travis Perkins as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Travis Perkins, and understanding this should be part of your investment process.

If you are no longer interested in Travis Perkins, 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) simplywallst.com.

This 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.

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