Meggitt PLC (LON:MGGT), which is in the aerospace & defense business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£6.74 at one point, and dropping to the lows of UK£2.17. 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 Meggitt's current trading price of UK£2.32 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 Meggitt’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Meggitt worth?
Good news, investors! Meggitt is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £3.13, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Meggitt’s share price may be quite stable relative to the rest of 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 Meggitt?
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. However, with a negative profit growth of -10% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Meggitt. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although MGGT is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to MGGT, 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 MGGT for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Meggitt. You can find everything you need to know about Meggitt in the latest infographic research report. If you are no longer interested in Meggitt, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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