Is Arcadis NV (AMS:ARCAD) potentially undervalued?

Arcadis NV (AMS:ARCAD) may not be a large-cap stock, but it has seen significant share price volatility on ENXTAM in recent months, rising to highs of EUR 66.05 and falling to lows of EUR 58.00. Some of the share price volatility could give investors a better opportunity to get in on the stock and potentially buy at a lower price. The question that needs to be answered is whether Arcadis’s current trading price of EUR 62.00 reflects the true value of the mid-cap stock? Or is it currently undervalued, giving us a buying opportunity? Let’s take a look at Arcadis’s outlook and value based on the latest financial data to see if there are any catalysts for a price change.

See our latest analysis for Arcadis

How much is Arcadis worth?

Arcadis is currently expensive based on our price multiple model, where we look at the company’s price-to-earnings ratio compared to the industry average. In this case, we’ve used the price-to-earnings ratio because there’s not enough visibility to forecast cash flows. The stock’s multiple of 27.55x is currently well above the industry average of 15.4x, meaning it’s trading at a higher price compared to its peers. But is there another opportunity to buy at a low price in the future? Since Arcadis’s share price is quite volatile, this could mean it could fall lower (or rise even higher) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator of how much the stock is moving relative to the rest of the market.

How much growth will Arcadis generate?

Investors looking for growth in their portfolio may want to consider the company’s prospects before buying its shares. While value investors will argue that the most important thing is the intrinsic value relative to the price, a more compelling investment thesis would be high growth potential at a low price. Arcadis’s earnings are expected to double over the next few years, indicating a very bright future. This should lead to stronger cash flows, which will translate into a higher share value.

What does this mean to you?

Are you a shareholder? ARCAD’s optimistic future growth seems to be factored into its current share price, with shares trading above multiples of industry prices. However, this raises another question – is now the right time to sell? If you think ARCAD should be trading below its current price, selling high and buying back in when its price falls towards its industry P/E could be worthwhile. But before you make that decision, check to see if its fundamentals have changed.

Are you a potential investor? If you’ve been following ARCAD for a while, now may not be the best time to get in. The stock has outperformed its industry peers, meaning it likely has no room to grow due to mispricing. However, the positive outlook for ARCAD is encouraging, meaning it’s worth delving into other factors to take advantage of the next price drop.

With this in mind, we would not consider investing in stocks until we had a thorough understanding of the risks. When it comes to investment risk, we have identified 2 warning signs from Arcadis, and understanding them should be part of your investment process.

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

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This Simply Wall St article is for general information purposes only. Our commentary is based solely on historical data and analyst forecasts, and is based on an objective methodology. Our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or your financial situation. Our goal is to provide you with long-term, focused analysis based on fundamental data. Please note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.