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

Morgan Advanced Materials plc (LON:MGAM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£2.78 at one point, and dropping to the lows of UK£2.19. 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£2.37 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?

Great news for investors – Morgan Advanced Materials is still trading at a fairly cheap price according to my price multiple model, where I compare 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 11.43x is currently well-below the industry average of 15.28x, meaning that it is trading at a cheaper price relative to its peers. However, given that Morgan Advanced Materials’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 Morgan Advanced Materials 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. 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. Morgan Advanced Materials' earnings over the next few years are expected to increase by 60%, 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? Since MGAM is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit 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 assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Morgan Advanced Materials has 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.