MRO:LSEMelrose Industries PLC Analysis
Data as of 2026-03-14 - not real-time
£499.30
Latest Price
6/10Risk
Risk Level: Medium
Executive Summary
Melrose Industries posted an 8% revenue increase to £3.59bn in 2025 and announced a dividend rise plus a £175 million share‑buyback, but 2026 profit guidance fell short of market expectations, triggering a sharp sell‑off that left the stock trading around £4.99 per share, just above the calculated support level of £4.99. The technical picture is mixed: the RSI of 26 signals oversold conditions, yet the MACD remains bearish and the price sits near the lower end of its 20‑day SMA (£5.93), suggesting limited upside in the very short run.
Fundamentally, the stock appears significantly undervalued – the DCF model pegs fair value at £5.98, implying a 41% upside from current levels, and the trailing PE of 0.17 dwarfs the industry average of 29. Margins are modest but stable, free cash flow is positive, and the dividend yield of 1.4% is supported by a minuscule payout ratio (0.2%). Despite a debt‑to‑equity ratio of 67%, the balance sheet is manageable given the cash position and ongoing buy‑back, making the stock attractive for value‑oriented investors.
Fundamentally, the stock appears significantly undervalued – the DCF model pegs fair value at £5.98, implying a 41% upside from current levels, and the trailing PE of 0.17 dwarfs the industry average of 29. Margins are modest but stable, free cash flow is positive, and the dividend yield of 1.4% is supported by a minuscule payout ratio (0.2%). Despite a debt‑to‑equity ratio of 67%, the balance sheet is manageable given the cash position and ongoing buy‑back, making the stock attractive for value‑oriented investors.
Market Outlook
Short Term
< 1 yearNeutral
Model confidence: 7/10
Key Factors
- Oversold RSI suggests potential bounce but MACD remains bearish
- Price is hovering just above key support level
- Recent profit guidance miss adds short‑term uncertainty
Medium Term
1–3 yearsPositive
Model confidence: 8/10
Key Factors
- DCF indicates ~41% upside versus current price
- Revenue growth of 8% and solid free cash flow
- Dividend sustainability and upcoming share buy‑back
Long Term
> 3 yearsPositive
Model confidence: 8/10
Key Factors
- Long‑term aerospace demand and defensive market positioning
- Significant valuation gap relative to peers
- Low payout ratio and strong cash generation support future returns
Key Metrics & Analysis
Financial Health
Revenue Growth8.30%
Profit Margin10.31%
P/E Ratio0.2
ROE13.05%
ROA4.96%
Debt/Equity67.31
P/B Ratio227.2
Op. Cash Flow£214.0M
Free Cash Flow£476.0M
Industry P/E29.1
Technical Analysis
TrendNeutral
RSI26.1
Support£498.85
Resistance£685.00
MA 20£593.20
MA 50£614.97
MA 200£583.61
MACDBearish
VolumeStable
Fear & Greed Index72.88
Valuation
Fair Value£597.51
Target Price£705.19
Upside/Downside41.24%
GradeUndervalued
TypeBlend
Dividend Yield1.40%
Risk Assessment
Beta0.55
Volatility48.11%
Sector RiskMedium
Reg. RiskMedium
Geo RiskMedium
Currency RiskMedium
Liquidity RiskLow
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This analysis may contain inaccuracies and is provided for informational and research purposes only. It is not personal investment advice, a recommendation, or an instruction to buy, sell, or hold any asset.