Is Millicom International Cellular S.A. (NASDAQ:TIGO) Potentially Undervalued?

Millicom International Cellular S.A. (NASDAQ:TIGO), might not be a large cap stock, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Millicom International Cellular’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Millicom International Cellular

What's the opportunity in Millicom International Cellular?

Great news for investors – Millicom International Cellular is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 4.58x is currently well-below the industry average of 31.2x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Millicom International Cellular’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, 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 Millicom International Cellular?

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. Though in the case of Millicom International Cellular, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although TIGO is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to TIGO, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on TIGO for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Millicom International Cellular has 4 warning signs (2 are significant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Millicom International Cellular, 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.