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MJ Gleeson plc (LON:GLE), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£7.26 and falling to the lows of UK£5.76. 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 MJ Gleeson's current trading price of UK£5.80 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MJ Gleeson’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 MJ Gleeson
What's the opportunity in MJ Gleeson?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.86% above my intrinsic value, which means if you buy MJ Gleeson today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth £5.33, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because MJ Gleeson’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 kind of growth will MJ Gleeson generate?
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 33% over the next couple of years, the future seems bright for MJ Gleeson. 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 GLE’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 conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on GLE, 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.