Is Now The Time To Look At Buying Universal Music Group N.V. (AMS:UMG)?

Let's talk about the popular Universal Music Group N.V. (AMS:UMG). The company's shares saw a decent share price growth of 11% on the ENXTAM over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? 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.

View our latest analysis for Universal Music Group

Is Universal Music Group Still Cheap?

Universal Music Group appears to be overvalued by 26% at the moment, based on our discounted cash flow valuation. The stock is currently priced at €29.23 on the market compared to our intrinsic value of €23.16. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Universal Music Group’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Universal Music Group?

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 50% over the next couple of years, the future seems bright 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 well and truly priced in UMG’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe UMG should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on UMG for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for UMG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Universal Music Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Universal Music Group and we think they deserve your attention.

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.

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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.