The Motley Fool

I was right about the Kier share price! Here’s what I’d do now

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Woman sneaker shoe and Arrow on street with copy space background
Image source: Getty Images

The last time I covered the Kier (LSE: KIE) share price, I noted that while the company had its problems, if it could get its house in order, the stock could surge. 

That’s just what’s happened. At the end of April, the company announced it was planning to raise as much as £240m from investors to strengthen its balance sheet.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

At the same time, the firm announced operating profits climbed to £28.8m for the last six months of 2020, from a loss of £24.4m the previous year. What’s more, the group’s construction order book stood at £8bn at the end of 2020. 

These figures are incredibly positive, and I think they support my opinion that the company could be at the beginning of a long growth spurt. 

Kier share price potential 

Since the company announced its fundraising, the stock has surged. Year-to-date, the Kier share price has added 82%. Over the past 12 months, the stock has increased in value by around 64%. 

Granted, this isn’t much in the grand scheme of things. Over the past five years, the stock is still down 88%. Nevertheless, past performance should never be used as a guide to future potential. Indeed, Kier’s fundamentals have improved substantially over the past 12 months. 

Kier looks set to benefit substantially from the government’s massive infrastructure spending plans over the next few years. As well as the £8bn of contracts at the end of 2020, it’s also won contracts this year. These include a £200m, eight-year deal with TfL.

Management also reckons the company is “well-placed to benefit” from £5bn of spending the government has brought forward to help stimulate the economy after coronavirus. 

Now the company has put its troubles behind it and is planning to shore up its balance sheet, these additional contracts should help its bottom line. That could be great news for investors and the Kier share price. After several years of restructuring, it looks as if the business is back on a stable footing. Now it can concentrate on growth. 

Risks and challenges 

Having said all of the above, the company is still exposed to the risks that plague the construction industry. For example, profit margins are usually thin. That leaves little room for error if costs rise substantially. And that’s just what could happen considering the tight labour market and rising materials costs we see right now. As a result, rising prices could ultimately destabilise the group’s growth plans. 

Still, even after taking this risk into account, I’d buy Kier shares for my portfolio today. I think the stock has excellent recovery potential. However, I’d only initiate a small position, to begin with, in case the group’s turnaround falters, due to the risks outlined above. 

Overall, I think the Kier share price has potential, but this company might not be suitable for all investors.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.