Is Now An Opportune Moment To Examine Marks and Spencer Group plc (LON:MKS)?

Marks and Spencer Group plc (LON:MKS), 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£4.11 and falling to the lows of UK£3.33. 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 Marks and Spencer Group's current trading price of UK£3.45 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Marks and Spencer Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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Is Marks and Spencer Group Still Cheap?

Marks and Spencer Group appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Marks and Spencer Group’s ratio of 23.53x is above its peer average of 16.4x, which suggests the stock is trading at a higher price compared to the Consumer Retailing industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Marks and Spencer 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

See our latest analysis for Marks and Spencer Group

Can we expect growth from Marks and Spencer Group?

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. Marks and Spencer Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in MKS’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe MKS should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MKS for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for MKS, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Marks and Spencer Group at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Marks and Spencer Group.

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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.