Motley Fool Australia

Is the Transurban share price a good buy right now?

Green traffic light in front of city office building
Image source: Getty Images

The Transurban Group (ASX: TCL) share price was hit hard during the early phase of the coronavirus pandemic. Its share price declined from $16.33 on 11 February to $10.50 on 20 March.

Since then its share price has regained over half of those losses and is currently trading at $14.15.

Easing of coronavirus restrictions has led to a progressive recovery in traffic on its tollways in local markets.

So, does the Transurban share price offer good value to investors right now?

Traffic volumes begin to recover

Earlier this week, Transurban reported that it has been witnessing a progressive recovery in traffic on its toll networks across Australia. This positive trend began in mid-April, in line with the staged lifting of government lockdown restrictions, as the number of active coronavirus cases gradually dropped.

Prior to this, there has had been a significant decline in traffic numbers from early March due to COVID-19 restrictions.

Toll road traffic, however, has been recovering much more slowly in Transurban’s North American market, due to harsher lockdown restrictions.

Transurban also acknowledged that traffic levels on its toll roads will remain highly sensitive to any further government action.

Just in the last few days, the Victorian government has announced that it may re-introduce even stricter lockdown measures in selected areas of Melbourne. This is due to a worrying recent trend of double-digit coronavirus infections across the past week. This recent surge in new cases indicates that Australia still has a long path ahead to fully contain the virus.

Strong balance sheet remains  

Transurban also revealed earlier this week that it remains in a strong liquidity position. Sufficient funds remain available to meet any capital requirements that may arise before mid next year. This also places the toll road operator in a position to take advantage of any investment opportunities that may arise.

Transurban also declared a final dividend payment for this financial year of 16 cents per share. This brings its total FY20 dividend distribution to 47 cents per share.

Is the Transurban share price in the buy zone?

With the Transurban share price still well down on where it was before the coronavirus pandemic hit, I think now offers a reasonable buying opportunity for patient investors with a long-term investment horizon. Traffic volumes should eventually get back to normal.

Transurban owns a virtual monopoly on the toll roads in Australia’s 2 largest cities; Sydney and Melbourne and have an expanding overseas presence. I believe it remains well-placed to capitalise on a growing population in these locations over the next 5–10 years.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Related Articles…