At UK£1.06, Is Airtel Africa Plc (LON:AAF) Worth Looking At Closely?

While Airtel Africa Plc (LON:AAF) might not have the largest market cap around , it saw a decent share price growth of 17% on the LSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Airtel Africa’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Airtel Africa

What Is Airtel Africa Worth?

Airtel Africa is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 37.35x is currently well-above the industry average of 18.15x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Airtel Africa’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 does the future of Airtel Africa look like?

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 more than double over the next couple of years, the future seems bright for Airtel Africa. 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? It seems like the market has well and truly priced in AAF’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe AAF 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 AAF 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 AAF, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Airtel Africa as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Airtel Africa, and understanding these should be part of your investment process.

If you are no longer interested in Airtel Africa, 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.