Is Emaar Properties PJSC (DFM:EMAAR) Potentially Undervalued?

Emaar Properties PJSC (DFM:EMAAR), might not be a large cap stock, but it led the DFM gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Emaar Properties PJSC’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Emaar Properties PJSC

What is Emaar Properties PJSC worth?

Great news for investors – Emaar Properties PJSC is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 6.62x is currently well-below the industry average of 12.4x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Emaar Properties PJSC’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Emaar Properties PJSC look like?

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. Though in the case of Emaar Properties PJSC, it is expected to deliver a negative earnings growth of -8.7%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although EMAAR is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to EMAAR, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on EMAAR for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Emaar Properties PJSC as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Emaar Properties PJSC you should know about.

If you are no longer interested in Emaar Properties PJSC, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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