Is Now An Opportune Moment To Examine Burberry Group plc (LON:BRBY)?

Today we're going to take a look at the well-established Burberry Group plc (LON:BRBY). The company's stock led the LSE gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Burberry Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Burberry Group

Is Burberry Group Still Cheap?

The share price seems sensible at the moment 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 19.04x is currently trading slightly above its industry peers’ ratio of 15.7x, which means if you buy Burberry Group today, you’d be paying a relatively reasonable price for it. And if you believe that Burberry Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Burberry Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Burberry Group generate?

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 grow by 28% over the next couple of years, the future seems bright for Burberry Group. 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? BRBY’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 BRBY? 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 tabs on BRBY, 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 BRBY, 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.

If you want to dive deeper into Burberry Group, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Burberry Group you should know about.

If you are no longer interested in Burberry 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.