Yahoo Finance Is Mueller Water Products, Inc. (NYSE:MWA) Potentially Undervalued?
Mueller Water Products, Inc. (NYSE:MWA), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$14.88 and falling to the lows of US$13.31. 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 Mueller Water Products' current trading price of US$14.44 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 Mueller Water Products’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Mueller Water Products
What is Mueller Water Products worth?
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 30.23x is currently trading slightly below its industry peers’ ratio of 34.1x, which means if you buy Mueller Water Products today, you’d be paying a decent price for it. And if you believe Mueller Water Products should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Mueller Water Products’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Mueller Water Products look like?
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. Mueller Water Products' earnings over the next few years are expected to increase by 45%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MWA’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 track record of its management team. Have these factors changed since the last time you looked at MWA? 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 MWA, 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 MWA, 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.
If you'd like to know more about Mueller Water Products as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Mueller Water Products, and understanding this should be part of your investment process.
If you are no longer interested in Mueller Water Products, 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. 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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