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Is Now The Time To Look At Buying Marshalls plc (LON:MSLH)?

Marshalls plc (LON:MSLH), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£5.46 and falling to the lows of UK£3.19. 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 Marshalls' current trading price of UK£3.25 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 Marshalls’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 Marshalls

Is Marshalls Still Cheap?

Marshalls appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Marshalls’s ratio of 19.7x is above its peer average of 9.56x, which suggests the stock is trading at a higher price compared to the Basic Materials industry. In addition to this, it seems like Marshalls’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.

What kind of growth will Marshalls generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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 more than double over the next couple of years, the future seems bright for Marshalls. 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 well and truly priced in MSLH’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MSLH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on MSLH for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for MSLH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Marshalls, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Marshalls and you'll want to know about these.

If you are no longer interested in Marshalls, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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