Is There Now An Opportunity In Mediaset España Comunicación, S.A. (BME:TL5)?

Mediaset España Comunicación, S.A. (BME:TL5), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the BME over the last few months, increasing to €5.57 at one point, and dropping to the lows of €4.69. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Mediaset España Comunicación's current trading price of €4.69 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Mediaset España Comunicación’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 Mediaset España Comunicación

Is Mediaset España Comunicación still cheap?

Great news for investors – Mediaset España Comunicación 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. 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 Mediaset España Comunicación’s ratio of 7.56x is below its peer average of 17.53x, which indicates the stock is trading at a lower price compared to the Media industry. However, given that Mediaset España Comunicación’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Mediaset España Comunicación generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 a negative profit growth of -0.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Mediaset España Comunicación. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although TL5 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 TL5, 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 TL5 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.

It can be quite valuable to consider what analysts expect for Mediaset España Comunicación from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

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

When trading Mediaset España Comunicación or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.