Is Now The Time To Look At Buying A.P. Møller - Mærsk A/S (CPH:MAERSK B)?

A.P. Møller - Mærsk A/S (CPH:MAERSK B) saw a double-digit share price rise of over 10% in the past couple of months on the CPSE. With many analysts covering the large-cap 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 A.P. Møller - Mærsk’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for A.P. Møller - Mærsk

Is A.P. Møller - Mærsk still cheap?

Great news for investors – A.P. Møller - Mærsk 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 10.15x is currently well-below the industry average of 21.76x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because A.P. Møller - Mærsk’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 does the future of A.P. Møller - Mærsk look like?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for A.P. Møller - Mærsk, at least in the near future.

What this means for you:

Are you a shareholder? Although MAERSK B is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to MAERSK B, 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 an eye on MAERSK B for a while, but hesitant on making the leap, I recommend you research further 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for A.P. Møller - Mærsk you should be mindful of and 1 of these shouldn't be ignored.

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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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