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Morgan Advanced Materials plc (LON:MGAM), might not be a large cap stock, but it led the LSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Morgan Advanced Materials’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Morgan Advanced Materials
Is Morgan Advanced Materials Still Cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 16% below my intrinsic value, which means if you buy Morgan Advanced Materials today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £3.76, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Morgan Advanced Materials’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.
What does the future of Morgan Advanced Materials 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. Morgan Advanced Materials' earnings over the next few years are expected to increase by 26%, 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 MGAM’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 an eye on MGAM, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.