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Mitchells & Butlers plc (LON:MAB), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the LSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the mid-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? Today we will analyse the most recent data on Mitchells & Butlers’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Mitchells & Butlers
What's The Opportunity In Mitchells & Butlers?
Mitchells & Butlers appears to be overvalued by 26% at the moment, based on our discounted cash flow valuation. The stock is currently priced at UK£2.91 on the market compared to our intrinsic value of £2.30. This means that the opportunity to buy Mitchells & Butlers 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. Given that Mitchells & Butlers’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Mitchells & Butlers look like?
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 more than double over the next couple of years, the future seems bright for Mitchells & Butlers. 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? MAB’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MAB 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.