Yahoo Finance Is Now The Time To Look At Buying Melrose Industries PLC (LON:MRO)?
Melrose Industries PLC (LON:MRO), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£1.74 and falling to the lows of UK£1.21. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Melrose Industries' current trading price of UK£1.21 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Melrose Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Melrose Industries
What is Melrose Industries worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10.67% above my intrinsic value, which means if you buy Melrose Industries today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £1.10, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Melrose Industries’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Melrose Industries?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 39% over the next year, the near-term future seems bright for Melrose Industries. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MRO’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on MRO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Melrose Industries as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Melrose Industries and we think they deserve your attention.
If you are no longer interested in Melrose Industries, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
