Is mBank S.A. (WSE:MBK) Potentially Undervalued?

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mBank S.A. (WSE:MBK), operating in the financial services industry based in Poland, received a lot of attention from a substantial price movement on the WSE over the last few months, increasing to PLN449.2 at one point, and dropping to the lows of PLN382.8. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether mBank’s current trading price of PLN400.6 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at mBank’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for mBank

What’s the opportunity in mBank?

The stock is currently trading at zł401 on the share market, which means it is overvalued by 38.37% compared to my intrinsic value of PLN289.51. Not the best news for investors looking to buy! In addition to this, it seems like mBank’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from mBank?

WSE:MBK Past and Future Earnings, June 5th 2019
WSE:MBK Past and Future Earnings, June 5th 2019

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. 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 grow by 47% over the next couple of years, the future seems bright for mBank. 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? MBK’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe MBK 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 an eye on MBK for a while, 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 optimistic prospect is encouraging for MBK, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on mBank. You can find everything you need to know about mBank in the latest infographic research report. If you are no longer interested in mBank, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.