Is Now The Time To Look At Buying Meliá Hotels International, S.A. (BME:MEL)?

Meliá Hotels International, S.A. (BME:MEL), might not be a large cap stock, but it saw a decent share price growth of 17% on the BME over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the 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 take a look at Meliá Hotels International’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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What Is Meliá Hotels International Worth?

According to our valuation model, Meliá Hotels International seems to be fairly priced at around 4.2% below our intrinsic value, which means if you buy Meliá Hotels International today, you’d be paying a fair price for it. And if you believe that the stock is really worth €7.21, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Meliá Hotels International’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

View our latest analysis for Meliá Hotels International

What kind of growth will Meliá Hotels International 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 a double-digit 20% over the next couple of years, the outlook is positive for Meliá Hotels International. 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 already priced in MEL’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 an eye on MEL, now may not be the most advantageous 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for Meliá Hotels International (1 is a bit concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Meliá Hotels International, 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.