When Should You Buy Virgin Money UK PLC (LON:VMUK)?

By
Simply Wall St
Published
January 22, 2020
LSE:VMUK
Source: Shutterstock

Virgin Money UK PLC (LON:VMUK), operating in the financial services industry based in United Kingdom, received a lot of attention from a substantial price increase on the LSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Virgin Money UK’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Virgin Money UK

What's the opportunity in Virgin Money UK?

Great news for investors – Virgin Money UK is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £3.18, but it is currently trading at UK£1.71 on the share market, meaning that there is still an opportunity to buy now. However, given that Virgin Money UK’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 does the future of Virgin Money UK look like?

LSE:VMUK Past and Future Earnings, January 23rd 2020
LSE:VMUK Past and Future Earnings, January 23rd 2020

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. With revenues expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Virgin Money UK. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? Since VMUK is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on VMUK for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy VMUK. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Virgin Money UK. You can find everything you need to know about Virgin Money UK in the latest infographic research report. If you are no longer interested in Virgin Money UK, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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