ACS has rebounded from its mid-March lows by just over 20%. It was one of the worst-performing stocks on Spain's benchmark Ibex 35 stock index, reaching levels as low as €11 per share after hovering near €40 at the end of last year. This reaction in the financial markets was somewhat expected, given that the stock was trading below its book value and offered an exceptional dividend yield. The company maintains its positive outlook for its business lines in the coming years.
It has also benefited from the notable rebound in the Ibex 35 over the last two weeks. Selling pressure has eased, and more importantly, volatility has decreased among companies listed on the stock exchange. In this general context, it's worth noting that last week's rebound has already reached 22%, and all indications suggest it will continue in the short term. In fact, a sideways movement with a slight upward slope and a target of 7.500 points remains the most likely scenario . This means that, with these expectations, there is still potential for further appreciation.
In this trend within the Spanish stock market's benchmark index, ACS is undoubtedly one of the biggest beneficiaries, as has become increasingly evident in recent days. It is one of the seven listed companies that has appreciated the most, outperforming even the major blue chips of the Ibex 35. However, the question now on the minds of many small and medium-sized investors is whether this upward movement has run its course or if, on the contrary, it has room to continue climbing. Their short-term target is around €22 or €23 per share, although this is still far from its initial price levels.
ACS: bullish in the short term
In any case, the construction company chaired by Florentino Pérez is experiencing the most comparative pressure these days. Indeed, in a very short time, its share price has risen from €11 to €19 . This is a significant step in reducing its losses in the financial markets and could encourage small and medium-sized investors to take a first look at this listed company. Now, it remains to be seen whether these movements are part of a significant rebound or something more substantial. For example, a change in trend in the very short term, especially considering that ACS shares have been among those that have fallen the most during the coronavirus crisis.
Within this context, the dramatic price movements observed in recent days cannot be overlooked . These movements, both positive and negative, have surprised small and medium-sized investors. Indeed, the price has seen differences of over 10% between its highest and lowest prices in a single trading session. These levels are very similar to those of stocks in the tourism sector, which has undoubtedly been the hardest hit by the tremendous spread of this virus across the globe. This has somewhat confounded the trading decisions of stock market participants.
Shoot your dividend up to 13%
One of the most significant effects of this stock market collapse has been the surge in ACS's dividend yield, which has jumped to nearly 13% from the previous 6%. Furthermore, it's worth noting that ACS is currently the listed company offering the highest shareholder returns, although these margins have narrowed as a result of the recent rebound. Its yield is higher than that of electricity companies, such as Iberdrola, Naturgy, and Endesa, which offer interest rates of around 6% or 7%. In all these cases, dividends have been maintained, unlike financial groups that have opted to suspend this form of payout.
On the other hand, ACS has no choice but to resume its upward trend, as it would be very difficult for it to generate a dividend above 10% from this point forward, as is currently the case. In any case, one thing is very clear: this construction company's profitability is already among the highest within the selective equity index of our country. This is one of the biggest incentives for small and medium-sized investors to take positions, with the goal of creating a more or less stable savings portfolio for the medium and, above all, the long term. This is especially true for investors with a more defensive or conservative profile.
Better behavior than the rest
The best sign that the Ibex 35 is very close to 7000 points during last week's session is that the rebound has room to reach 7400 , and we'll see if it continues from there. One of the stocks that could perform best is precisely this construction company. Its share price deviation could be between one and two percentage points compared to other stocks in the benchmark index of the Spanish stock exchange. Furthermore, it's equally important to note that the worst for ACS appears to be over, and it can only move further up the value ladder. It has significant potential for appreciation from this point forward, outperforming other stocks in its sector.
It's also important to note that at the moment, everything hinges on movements in the equity markets. In other words, it doesn't depend on the company's own performance in the financial markets. On the contrary, the factor driving company valuations is the virus itself and the ability to contain it from this point forward. But ACS's reaction in recent days has certainly been more than satisfactory and, in some ways, unexpected for many small and medium-sized investors. This is further underscored by its very strong fundamentals. And if it was previously trading near €40, it's simply not acceptable that it's now worth less than €20 per share. That's a discount of over 50%.
In addition, there is the fact that until a few months ago the valuations by financial intermediaries were very satisfactory for the interests of small and medium investors. In all cases with margins above 30 euros and with very positive expectations for the coming years. Where it became one of the most stable values ​​within the Ibex 35 and therefore one of the preferred by national brokers and outside our borders. Being present in a good part of the investment portfolios that have been carried out by the investment fund managers. Being one of the most active values ​​when it comes to shaping the investment channels to make profitable the savings of the clients of financial entities. Although there are still many weeks left to see what path he is going to take for the next few years.
Grows 7% in 2019
ACS Group sales in 2019 reached 39.049 million euros, representing an increase of 6,5% thanks to the strength shown by the North American, Australian and Spanish markets, which are the most important of the group. Sales in North America represent 50% of the total, Europe 20%, Australia 19%, Asia 6%, South America 6% and Africa the remaining 1%. Sales in Spain account for 14% of the total.
By countries, the United States, Australia, Spain, Canada and Germany contribute 82% of total sales. While on the other hand, the portfolio at the end of 2019 stood at 77.756 million euros, growing 7,7% (6% eliminating the effect of the exchange rate). Where the gross operating profit (EBITDA) has reached 3.148 million euros, increasing 7,0% and improving the margin by 10 bp to 8,1% on sales. For its part, the net operating profit (EBIT) of 2.126 million euros increased by 3,7%. The margin on sales stands at 5,4%. In what is configured as one of the greatest incentives for small and medium investors to enter their positions. With the goal of creating a more or less stable savings exchange for the medium and especially long term. Especially for users with a more defensive or conservative profile.