Is There Now An Opportunity In Burberry Group plc (LON:BRBY)?

Let's talk about the popular Burberry Group plc (LON:BRBY). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Burberry Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Burberry Group

What is Burberry Group worth?

According to my valuation model, the stock is currently overvalued by about 21%, trading at UK£18.60 compared to my intrinsic value of £15.32. This means that the opportunity to buy Burberry Group at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Burberry Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Burberry Group look like?

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Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Burberry Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? BRBY’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe BRBY should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BRBY for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for BRBY, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Burberry Group at this point in time. While conducting our analysis, we found that Burberry Group has 3 warning signs and it would be unwise to ignore them.

If you are no longer interested in Burberry Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. 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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