Is There Now An Opportunity In Monadelphous Group Limited (ASX:MND)?

Monadelphous Group Limited (ASX:MND), might not be a large cap stock, but it saw a decent share price growth in the teens level on the ASX over the last few months. With many analysts covering the 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? Let’s examine Monadelphous Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Monadelphous Group

Is Monadelphous Group Still Cheap?

Monadelphous Group appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Monadelphous Group’s ratio of 23.95x is above its peer average of 17.38x, which suggests the stock is trading at a higher price compared to the Construction industry. But, is there another opportunity to buy low in the future? Since Monadelphous Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Monadelphous Group?

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. With profit expected to grow by 71% over the next couple of years, the future seems bright for Monadelphous Group. 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 well and truly priced in MND’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MND should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MND for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for MND, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Monadelphous Group, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for Monadelphous Group and you'll want to know about it.

If you are no longer interested in Monadelphous Group, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.