At €24.70, Is Universal Music Group N.V. (AMS:UMG) Worth Looking At Closely?

Let's talk about the popular Universal Music Group N.V. (AMS:UMG). The company's shares saw a decent share price growth of 13% on the ENXTAM over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-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? Let’s take a look at Universal Music Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Universal Music Group

What's The Opportunity In Universal Music Group?

According to our valuation model, Universal Music Group seems to be fairly priced at around 9.0% below our intrinsic value, which means if you buy Universal Music Group today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €27.14, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Universal Music Group’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Universal Music 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 a double-digit 18% over the next couple of years, the outlook is positive for Universal Music Group. 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 UMG’s positive outlook, 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 UMG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Universal Music Group you should know about.

If you are no longer interested in Universal Music Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.