Argan (ENXTPA:ARG) Could Be 17% Below Fair Value Following Ferrero Warehouse Deal

Argan (ENXTPA:ARG) has expanded its French logistics footprint with the acquisition of two newly delivered, food grade warehouses near Rouen, fully leased to Ferrero on 10 year fixed contracts.

See our latest analysis for Argan.

Against this operational backdrop, Argan’s share price has shown modest positive momentum, with a 7 day share price return of 3.31% and a 30 day share price return of 4.34%, while the 1 year total shareholder return stands at 4.16%.

If this kind of logistics focused growth story interests you, it could be a good moment to widen your watchlist using our screener of 34 power grid technology and infrastructure stocks

After Argan’s latest Ferrero backed warehouses and the recent share price uptick, the current €62.50 price sits well below both analyst targets and intrinsic estimates. So where does a reasonable view of fair value actually land?

Price-to-Earnings of 6.6x: Is it justified?

On the latest figures, Argan trades on a P/E of 6.6x, which screens as inexpensive compared to both its own fair P/E estimate and peers, even after the recent move to €62.50.

The P/E multiple compares the current share price with earnings per share, so for a real estate company like Argan it is effectively the market’s snapshot of how much investors are paying for each euro of current earnings.

Here, that snapshot looks low. Argan’s 6.6x sits well below the estimated fair P/E of 11x, a level the market could potentially migrate toward if sentiment around its earnings profile shifts.

The gap widens further against the wider set of listed comparables, with Argan trading at 6.6x versus a French peer average of 18.3x and a global Industrial REITs average of 16x. This represents a sizeable discount on both counts.

Explore the SWS fair ratio for Argan

Result: Price-to-Earnings of 6.6x (UNDERVALUED)

However, there are still some clear pressure points for Argan, including annual revenue and net income that recently declined, along with a 5 year total return that remains down 30%.

Find out about the key risks to this Argan narrative.

Another view on Argan’s value

The P/E points to Argan as inexpensive, but the SWS DCF model also suggests the stock trades below an estimated future cash flow value of €75.61, implying a 17.3% gap to fair value. When both earnings and cash flow views align like this, is the risk more about the business than the price?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Argan for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 216 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the mixed signals around Argan have you on the fence, now is a good time to review the details and decide for yourself. To weigh those concerns against the potential upside, take a look at the 4 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Argan?

If Argan has sharpened your focus on value and quality, do not stop here. Broaden your opportunity set with a few targeted stock ideas built from data driven screeners.

• Target potential mispricing by reviewing companies screened as attractively valued with solid fundamentals through the 216 high quality undervalued stocks.
• Strengthen your income watchlist by zeroing in on dependable high yielders using the 461 dividend fortresses.
• Balance potential reward with stability by filtering for companies that pass tough quality and risk checks via the 297 resilient stocks with low risk scores.

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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