Meliá Hotels International SA. (BME:MEL), a hospitality company based in Spain, received a lot of attention from a substantial price movement on the BME in the over the last few months, increasing to €12.2 at one point, and dropping to the lows of €10.82. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Meliá Hotels International’s current trading price of €11.44 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Meliá Hotels International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Meliá Hotels International
What is Meliá Hotels International worth?Meliá Hotels International appears to be overvalued by 36% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €11.44 on the market compared to my intrinsic value of €8.42. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Meliá Hotels International’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 intrinsic value over time, 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 Meliá Hotels International 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. Meliá Hotels International’s earnings over the next few years are expected to increase by 27.63%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MEL’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MEL should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 MEL for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for MEL, which means it’s worth diving deeper into other factors 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 Meliá Hotels International. You can find everything you need to know about Meliá Hotels International in the latest infographic research report. If you are no longer interested in Meliá Hotels International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.