Millicom International Cellular S.A. (NASDAQ:TIGO), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Millicom International Cellular’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Millicom International Cellular still cheap?
Good news, investors! Millicom International Cellular is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to 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 Millicom International Cellular’s ratio of 3.8x is below its peer average of 29.69x, which indicates the stock is trading at a lower price compared to the Wireless Telecom industry. What’s more interesting is that, Millicom International Cellular’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, 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 does the future of Millicom International Cellular look like?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Millicom International Cellular, at least in the near future.
What this means for you:
Are you a shareholder? Although TIGO is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to TIGO, 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 TIGO for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into Millicom International Cellular, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Millicom International Cellular (of which 1 doesn't sit too well with us!) you should know about.
If you are no longer interested in Millicom International Cellular, 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.