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Monadelphous Group Limited (ASX:MND), might not be a large cap stock, but it saw a decent share price growth of 13% on the ASX over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a 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 Monadelphous Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Monadelphous Group
Is Monadelphous Group Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 20.49x is currently trading slightly above its industry peers’ ratio of 17.43x, which means if you buy Monadelphous Group today, you’d be paying a relatively reasonable price for it. And if you believe Monadelphous Group should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Monadelphous Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Monadelphous 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. 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. Monadelphous Group's earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in MND’s positive outlook, with shares trading around industry price multiples. 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 MND? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?