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

While Marks and Spencer Group plc (LON:MKS) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Marks and Spencer Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Marks and Spencer Group

What's the opportunity in Marks and Spencer Group?

According to my valuation model, Marks and Spencer Group seems to be fairly priced at around 10% below my intrinsic value, which means if you buy Marks and Spencer Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth £1.74, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Marks and Spencer Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

What kind of growth will Marks and Spencer Group 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. 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. However, with a relatively muted revenue growth of 6.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Marks and Spencer Group, at least in the short term.

What this means for you:

Are you a shareholder? MKS’s future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on MKS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Marks and Spencer Group, and understanding it should be part of your investment process.

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This article by Simply Wall St is general in nature. 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.
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