Is the Micro Focus International share price (LON:MCRO) good value?

Is the Micro Focus International share price (LON:MCRO) good value?

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Here's why how cheap or expensive shares in large cap Software operator Micro Focus International (LON:MCRO)matters.

Stacks of academic research covering different time frames and regions of the world all come to the same conclusion: over time and on average, cheap stocks outperform expensive stocks.

This sounds so glaringly simple and obvious. So, how come we're not all rich?

The fact is cheap shares are often cheap for a reason. They can look unappetising. And, while the evidence shows that maintaining a value strategy through boom and bust will be rewarded, sticking with it is actually extraordinarily hard. Yet the evidence is so compelling that value is one of Stockopedia's three main factors in investment returns.

One of the masters of value (and factor) investing is Jim O'Shaughnessy, the founder of O’Shaughnessy Asset Management (OSAM). In the 4th edition of his groundbreaking investment research tome What Works on Wall St, O’Shaughnessy showed that composite value factors based on a mix of metrics dramatically beat the market over a multi-decade period.

It was from this robust insight that Stockopedia’s Value Rank was born, its synergy coming from the following simple valuation ratios:

  • Price to Book Value
  • Price to Earnings
  • Price to Free Cash Flow
  • Dividend Yield %
  • Price to Sales
  • Earnings Yield %

How does Micro Focus International stack up?

Micro Focus International's Value Rank

We can see by using Micro Focus International’s StockReport that the group has a:

  • Rolling price to book value of 0.62,
  • Rolling price to earnings ratio of 6.36
  • Trailing twelve-month price to free cash flow of 3.61
  • Rolling dividend yield of 8.44%
  • Trailing twelve-month price to sales ratio of 1.34

When we add all of these together, we find that Micro Focus International has a Value Rank of 85. Investing in high-value stocks requires finesse and a sturdy constitution but, when cheap stocks come good, the payoff can be large and sudden.

Micro Focus International’s Value Rank of 85 puts it in the cheapest quartile of the stock market. That is certainly a promising jumping off point for our analysis but it is not the whole story.


What does this mean for potential investors?

Some of the best quality stocks in the market have defensible models that can deliver high levels of shareholder returns over the long term. But there are no guarantees and it's important to do your own research. Indeed, we've identified some areas of concern with Micro Focus International that you can find out about here.


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Stockopedia helps individual investors make confident, profitable choices in the stock market. Our StockRank and factor investing toolbox unlocks institutional-quality insights into thousands of global stocks. Voted “Best Investment Research Tools” and “Best Research Service” at the 2021 UK Investor Magazine awards.

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.