When Should You Buy Morgan Sindall Group plc (LON:MGNS)?

Morgan Sindall Group plc (LON:MGNS), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Morgan Sindall Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Morgan Sindall Group

What's The Opportunity In Morgan Sindall Group?

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 12.52x is currently trading slightly below its industry peers’ ratio of 12.54x, which means if you buy Morgan Sindall Group today, you’d be paying a reasonable price for it. And if you believe Morgan Sindall Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. 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?

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. Morgan Sindall Group's earnings over the next few years are expected to increase by 76%, 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 already priced in MGNS’s positive outlook, 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 confidence to invest in the company should the price drop 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. In terms of investment risks, we've identified 3 warning signs with Morgan Sindall Group, and understanding them should be part of your investment process.

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.

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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.