Up 22% in the last six months to a lofty £414.19 at the time of writing, Biffa (LSE:BIFF) shares are certainly a world apart from the rubbish that is the company’s raison d’etre. Indeed, they are one of the highest risers on Britain’s FTSE 350, as British markets are pummelled by a plummeting sterling and spooked investors.
To us investors, it is a timely reminder that there is value to be found amid British assets. Even as bonds are discarded faster than the trash that Biffa deals with.
However, should I buy Biffa during its finest hour? Alternatively, perhaps wait for its price to settle into the dependable banality of its service? Or simply give it a pass?
The giddy share-price rise came as Biffa was acquired for a handsome sum of £1.1bn. Albeit, that’s £300m less than the £1.4bn that was mooted in June. This reduction has been attributed to the weakness of sterling in relation to the jacked US dollar and the economic chaos wrought by U-turns made by the British government recently.
Overvalued?
That the takeover was the cause for the soaring share price rather than strong performance data, for instance, suggests to me that the rise will not be repeated tomorrow or any time soon. Buying now would be acquiring an asset at the crest of a breaking wave driven by human hype rather than giddy business performance, in my opinion. That rules out purchasing immediately, lest the swell of optimism that propelled it quickly plummets.
The choice for me then, Fools, is whether to buy the company’s shares in the immediate future or pass.
The long-term vision of ECP (Energy Capital Partners), which bought Biffa, is compelling. It believes that patient, sustained investment will enable Biffa to thrive in its key markets of waste collection and sustainable disposal. It is certainly aided by the UK government’s target to increase plastic recycling and eliminate avoidable waste. Future initiatives to do so will likely play into the hands, or wallets, of Biffa shareholders. This is especially true given its entrenched position. It operates from 195 locations nationwide and servicing a diverse range of industries, from construction to retail.
However, an immediate threat is the wider economic picture of inflation and labour unrest. Biffa is vulnerable to workers striking to prevent their pay being eroded by inflation. Particularly so as their discontent will quickly result in piles of trash on our streets. The subsequent PR crisis would leave Biffa investors sweating, I’d suggest.
My future approach to Biffa shares
Overall, the long-term prospects of this company enable me to gaze beyond the immediate economic gloom and envision an asset that will reliably appreciate. I’d contemplate buying its shares, but not right now.
