Let's talk about the popular London Stock Exchange Group plc (LSE:LSE). The company's shares received a lot of attention from a substantial price movement on the LSE in the over the last few months, increasing to £40.43 at one point, and dropping to the lows of £36.49. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether London Stock Exchange Group's current trading price of £38.63 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at London Stock Exchange 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 London Stock Exchange Group
What's the opportunity in London Stock Exchange Group?According to my valuation model, the stock is currently overvalued by about 77%, trading at UK£38.63 compared to my intrinsic value of £21.86. This means that the buying opportunity has probably disappeared for now. Furthermore, London Stock Exchange Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of London Stock Exchange Group look like?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. With profit expected to grow by 89.24% over the next couple of years, the future seems bright for London Stock Exchange Group. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? LSE’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe LSE should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 LSE for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for LSE, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on London Stock Exchange Group. You can find everything you need to know about London Stock Exchange Group in the latest infographic research report. If you are no longer interested in London Stock Exchange Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.