Universal Music Group N.V. (AMS:UMG) saw a double-digit share price rise of over 10% in the past couple of months on the ENXTAM. While good news for shareholders, the company has traded much higher in the past year. 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, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Universal Music Group’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Universal Music Group

What's The Opportunity In Universal Music Group?

According to our valuation model, Universal Music Group seems to be fairly priced at around 15% below our intrinsic value, which means if you buy Universal Music Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth €27.73, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Universal Music Group has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Universal Music 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. Universal Music Group's earnings over the next few years are expected to increase by 20%, 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 UMG’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on UMG, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.