IMI plc (LON:IMI), is not the largest company out there, but it maintained its current share price over the past couple of month on the LSE, with a relatively tight range of UK£16.66 to UK£18.27. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at IMI’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in IMI?
According to my valuation model, the stock is currently overvalued by about 25%, trading at UK£17.97 compared to my intrinsic value of £14.33. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since IMI’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of IMI 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. IMI's earnings over the next few years are expected to increase by 23%, 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? It seems like the market has well and truly priced in IMI’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe IMI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IMI for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for IMI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about IMI as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for IMI you should be aware of.
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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.
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