Morgan Advanced Materials plc (LON:MGAM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£4.03 at one point, and dropping to the lows of UK£3.32. 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£3.53 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.
What is Morgan Advanced Materials worth?
According to my valuation model, Morgan Advanced Materials seems to be fairly priced at around 18% below my intrinsic value, which means if you buy Morgan Advanced Materials today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £4.32, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Morgan Advanced Materials’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double 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? It seems like the market has already priced in MGAM’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on MGAM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for Morgan Advanced Materials and you'll want to know about them.
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.