MJ Gleeson plc (LON:GLE), is not the largest company out there, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£8.50 and falling to the lows of UK£7.40. 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 MJ Gleeson's current trading price of UK£7.70 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MJ Gleeson’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in MJ Gleeson?
The share price seems sensible at the moment 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 13.25x is currently trading in-line with its industry peers’ ratio, which means if you buy MJ Gleeson today, you’d be paying a relatively reasonable price for it. Is there another opportunity to buy low in the future? Since MJ Gleeson’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will MJ Gleeson generate?
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 38% over the next couple of years, the future seems bright for MJ Gleeson. 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 GLE’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 GLE? 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 tabs on GLE, 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 GLE, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for MJ Gleeson and we think they deserve your attention.
If you are no longer interested in MJ Gleeson, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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.
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