When Should You Buy MGI Digital Technology Société Anonyme (EPA:ALMDG)?

While MGI Digital Technology Société Anonyme (EPA:ALMDG) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ENXTPA, rising to highs of €44.20 and falling to the lows of €38.55. 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 MGI Digital Technology Société Anonyme's current trading price of €39.20 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 MGI Digital Technology Société Anonyme’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for MGI Digital Technology Société Anonyme

What is MGI Digital Technology Société Anonyme worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 MGI Digital Technology Société Anonyme’s ratio of 17.68x is trading slightly below its industry peers’ ratio of 19.84x, which means if you buy MGI Digital Technology Société Anonyme today, you’d be paying a reasonable price for it. And if you believe that MGI Digital Technology Société Anonyme should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because MGI Digital Technology Société Anonyme’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 kind of growth will MGI Digital Technology Société Anonyme 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. MGI Digital Technology Société Anonyme's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in ALMDG’s positive outlook, with shares trading around industry price multiples. 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 ALMDG? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on ALMDG, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for ALMDG, which means it’s worth diving deeper into 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 MGI Digital Technology Société Anonyme at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of MGI Digital Technology Société Anonyme.

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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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