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Universal Music Group N.V. (AMS:UMG) saw a double-digit share price rise of over 10% in the past couple of months on the ENXTAM. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Universal Music Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Universal Music Group
Is Universal Music Group Still Cheap?
According to my valuation model, Universal Music Group seems to be fairly priced at around 12.24% above my intrinsic value, which means if you buy Universal Music Group today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is €22.13, there’s only an insignificant downside when the price falls to its real value. What's more, Universal Music Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from Universal Music Group?
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 63% over the next couple of years, the future seems bright for Universal Music Group. 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 UMG’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 track record of its management team. 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 tabs on UMG, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Universal Music Group.