Banca Monte dei Paschi di Siena S.p.A. (BIT:BMPS), operating in the financial services industry based in Italy, saw significant share price movement during recent months on the BIT, rising to highs of €1.66 and falling to the lows of €1.40. 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 Banca Monte dei Paschi di Siena’s current trading price of €1.43 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 Banca Monte dei Paschi di Siena’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Banca Monte dei Paschi di Siena worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’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 10.41x is currently trading slightly above its industry peers’ ratio of 8.87x, which means if you buy Banca Monte dei Paschi di Siena today, you’d be paying a relatively reasonable price for it. And if you believe Banca Monte dei Paschi di Siena should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Banca Monte dei Paschi di Siena’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Banca Monte dei Paschi di Siena?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Banca Monte dei Paschi di Siena. 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 BMPS’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 BMPS? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on BMPS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for BMPS, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Banca Monte dei Paschi di Siena. You can find everything you need to know about Banca Monte dei Paschi di Siena in the latest infographic research report. If you are no longer interested in Banca Monte dei Paschi di Siena, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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