At UK£19.30, Is It Time To Put Morgan Sindall Group plc (LON:MGNS) On Your Watch List?

Published
July 21, 2022
LSE:MGNS
Source: Shutterstock

Morgan Sindall Group plc (LON:MGNS), is not the largest company out there, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£24.00 and falling to the lows of UK£17.76. 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 Sindall Group's current trading price of UK£19.30 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 Sindall Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Morgan Sindall Group

Is Morgan Sindall Group still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 9.08x is currently trading slightly below its industry peers’ ratio of 13.1x, which means if you buy Morgan Sindall Group today, you’d be paying a reasonable price for it. And if you believe that Morgan Sindall Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Morgan Sindall Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Morgan Sindall Group look like?

earnings-and-revenue-growth
LSE:MGNS Earnings and Revenue Growth July 21st 2022

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 Sindall Group's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? MGNS’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 MGNS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on MGNS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for MGNS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Morgan Sindall Group as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Morgan Sindall Group and you'll want to know about this.

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

Valuation is complex, but we're helping make it simple.

Find out whether Morgan Sindall Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis