Yahoo Finance Is It Too Late To Consider Buying B&M European Value Retail S.A. (LON:BME)?
While B&M European Value Retail S.A. (LON:BME) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£4.59 at one point, and dropping to the lows of UK£3.56. 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 B&M European Value Retail's current trading price of UK£3.70 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 B&M European Value Retail’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for B&M European Value Retail
Is B&M European Value Retail Still Cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.77x is currently trading slightly below its industry peers’ ratio of 10.49x, which means if you buy B&M European Value Retail today, you’d be paying a reasonable price for it. And if you believe B&M European Value Retail should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like B&M European Value Retail’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of B&M European Value Retail look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -8.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for B&M European Value Retail. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, BME appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BME, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on BME for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on BME should the price fluctuate below the industry PE ratio.
If you'd like to know more about B&M European Value Retail as a business, it's important to be aware of any risks it's facing. For example, we've found that B&M European Value Retail has 3 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
If you are no longer interested in B&M European Value Retail, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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