Assessing Mirvac Group (ASX:MGR) Valuation as Earnings Growth Projections Brighten Outlook After Weak Financial Performance

Mirvac Group (ASX:MGR) has recently come under focus as financial results show its return on equity lags far behind sector averages, with net income shrinking over several years. However, projections now point to potential growth ahead.

See our latest analysis for Mirvac Group.

Mirvac’s share price has steadily gained momentum in 2024, rising over 21% year-to-date to A$2.29, as forward-looking optimism appears to outweigh concerns about its weaker recent fundamentals. Long-term investors have still seen a solid 41% total return over three years, even with near-term challenges in profitability and payout ratios.

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With improved forecasts now on the table and shares trading at only a modest discount to analyst targets, the question is whether Mirvac’s current price undervalues its upside or if future growth is already priced in.

Most Popular Narrative: 4.9% Undervalued

The most popular narrative currently values Mirvac Group at a moderate premium to its last close, seeing A$2.41 as fair value against the recent A$2.29 price. This signals cautious optimism, but the details behind this target rest on bold growth and margin improvement assumptions.

Leadership in sustainable development and recent reaffirmation of a 2030 net positive carbon target aligns with both growing tenant and investor preferences for ESG-compliant assets. This is expected to support higher leasing spreads, stronger occupancy (currently 98%), and potential premium rental rates, bolstering NOI and future earnings.

Read the complete narrative.

What’s driving the math behind Mirvac’s valuation? This story hinges on ambitious profit margin expansion and a remarkable transformation in earnings power. Can these bullish forecasts justify the premium? Get the inside scoop on the forward-looking assumptions and decide for yourself how realistic this scenario is.

Result: Fair Value of $2.41 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, project execution hurdles or a downturn in Australia’s office property market could quickly alter the optimistic outlook that is built into current forecasts.

Find out about the key risks to this Mirvac Group narrative.

Another View: Gauging Value Through Earnings Ratios

Looking at Mirvac through its earnings ratio, a different picture emerges. Its current price-to-earnings ratio stands at 132.9x, which is much higher than both the industry average of 15.6x and the peer average of 29.6x. The fair ratio, at 24.3x, suggests the market could shift lower if industry norms reassert themselves. This sizeable gap may indicate valuation risk that investors should be aware of. Does Mirvac’s long-term story justify such a premium?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Mirvac Group Narrative

If you want to dig deeper or feel the analysis misses something, you can craft your own narrative in just a few minutes. Do it your way

A great starting point for your Mirvac Group research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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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.

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