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Maple Leaf Foods Inc. (TSE:MFI), is not the largest company out there, but it saw a decent share price growth of 16% on the TSX over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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. However, what if the stock is still a bargain? Let’s examine Maple Leaf Foods’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's The Opportunity In Maple Leaf Foods?
Maple Leaf Foods appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Maple Leaf Foods’s ratio of 29.29x is above its peer average of 12.12x, which suggests the stock is trading at a higher price compared to the Food industry. In addition to this, it seems like Maple Leaf Foods’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, 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.
View our latest analysis for Maple Leaf Foods
Can we expect growth from Maple Leaf Foods?
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. Maple Leaf Foods' revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? MFI’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MFI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.