Is It Time To Consider Buying Marimekko Oyj (HEL:MEKKO)?

While Marimekko Oyj (HEL:MEKKO) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the HLSE. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Marimekko Oyj’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Marimekko Oyj

Is Marimekko Oyj still cheap?

According to my valuation model, Marimekko Oyj seems to be fairly priced at around 9.69% above my intrinsic value, which means if you buy Marimekko Oyj today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is €48.04, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Marimekko Oyj’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 Marimekko Oyj look like?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Marimekko Oyj's earnings over the next few years are expected to increase by 44%, 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? MEKKO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on MEKKO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Marimekko Oyj at this point in time. While conducting our analysis, we found that Marimekko Oyj has 1 warning sign and it would be unwise to ignore it.

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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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