Is It Time To Consider Buying Morgan Advanced Materials plc (LON:MGAM)?

Morgan Advanced Materials plc (LON:MGAM), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£3.25 and falling to the lows of UK£2.42. 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 Morgan Advanced Materials' current trading price of UK£2.44 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 Morgan Advanced Materials’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Morgan Advanced Materials

What Is Morgan Advanced Materials Worth?

Good news, investors! Morgan Advanced Materials is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.44x is currently well-below the industry average of 16.41x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Morgan Advanced Materials’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Morgan Advanced Materials?

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. With profit expected to grow by 26% over the next couple of years, the future seems bright for Morgan Advanced Materials. 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 MGAM is currently below the industry PE ratio, it may be a great time to increase 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 price multiple.

Are you a potential investor? If you’ve been keeping an eye on MGAM for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MGAM. 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 investment decision.

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

If you are no longer interested in Morgan Advanced Materials, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.