Is Now The Time To Look At Buying Airtel Africa Plc (LON:AAF)?

Airtel Africa Plc (LON:AAF), is not the largest company out there, but it saw a decent share price growth of 17% on the LSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Airtel Africa’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Airtel Africa

What Is Airtel Africa Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Airtel Africa’s ratio of 19.49x is trading in-line with its industry peers’ ratio, which means if you buy Airtel Africa today, you’d be paying a relatively reasonable price for it. In addition to this, it seems like Airtel Africa’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Airtel Africa?

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 already priced in AAF’s positive outlook, with shares trading around industry price multiples. 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 AAF? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on AAF, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AAF, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Airtel Africa at this point in time. 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.