At UK£1.56, Is It Time To Put B&M European Value Retail S.A. (LON:BME) On Your Watch List?

While B&M European Value Retail S.A. (LON:BME) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£2.64 at one point, and dropping to the lows of UK£1.56. 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 B&M European Value Retail's current trading price of UK£1.56 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 B&M European Value Retail’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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What's The Opportunity In B&M European Value Retail?

Great news for investors – B&M European Value Retail is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to 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 B&M European Value Retail’s ratio of 6.31x is below its peer average of 17.23x, which indicates the stock is trading at a lower price compared to the Multiline Retail industry. What’s more interesting is that, B&M European Value Retail’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Check out our latest analysis for B&M European Value Retail

What kind of growth will B&M European Value Retail generate?

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. 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. However, with a negative profit growth of -7.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for B&M European Value Retail. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although BME is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to BME, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on BME for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into B&M European Value Retail, you'd also look into what risks it is currently facing. For example, B&M European Value Retail has 4 warning signs (and 1 which is a bit concerning) we think you should know about.

If you are no longer interested in B&M European Value Retail, 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.