What Does MTN Group Limited's (JSE:MTN) Share Price Indicate?
Let's talk about the popular MTN Group Limited (JSE:MTN). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the JSE. 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, what if the stock is still a bargain? Let’s examine MTN Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for MTN Group
What's The Opportunity In MTN Group?
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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that MTN Group’s ratio of 13.74x is trading slightly above its industry peers’ ratio of 13.67x, which means if you buy MTN Group today, you’d be paying a relatively reasonable price for it. And if you believe that MTN Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, MTN Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will MTN Group generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 MTN 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? MTN’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at MTN? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on MTN, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MTN, 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.
It can be quite valuable to consider what analysts expect for MTN Group from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in MTN 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.
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