Is Maisons du Monde S.A.’s (EPA:MDM) Growth Strong Enough To Justify Its December Share Price?

Maisons du Monde S.A. (EPA:MDM) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of €17.64 is based on unrealistic expectations. Let’s look into this by assessing MDM’s expected growth over the next few years.

Check out our latest analysis for Maisons du Monde

What are the future expectations?

Investors in Maisons du Monde have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 10 analysts is certainly positive with earnings forecasted to rise significantly from today’s level of €1.432 to €2.022 over the next three years. This results in an annual growth rate of 12%, on average, which illustrates an optimistic outlook in the near term.

Can MDM’s share price be justified by its earnings growth?

Stocks like Maisons du Monde, with a price-to-earnings (P/E) ratio of 12.32x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that MDM is undervalued relative to the current FR market average of 14.32x , and overvalued based on current earnings compared to the specialty retail industry average of 11.83x .

ENXTPA:MDM PE PEG Gauge December 12th 18
ENXTPA:MDM PE PEG Gauge December 12th 18

After looking at MDM’s value based on current earnings, we can see it seems overvalued relative to other companies in the industry. But, since Maisons du Monde is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 12.32x and expected year-on-year earnings growth of 12% give Maisons du Monde an acceptable PEG ratio of 1.06x. This means that, when we account for Maisons du Monde’s growth, the stock can be viewed as slightly overvalued , based on its fundamentals.

What this means for you:

MDM’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are MDM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Valuation: What is MDM worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MDM is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.