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While McMillan Shakespeare Limited (ASX:MMS) might not have the largest market cap around , it led the ASX gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on McMillan Shakespeare’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for McMillan Shakespeare
Is McMillan Shakespeare Still Cheap?
According to our valuation model, McMillan Shakespeare seems to be fairly priced at around 12% below our intrinsic value, which means if you buy McMillan Shakespeare today, you’d be paying a fair price for it. And if you believe the company’s true value is A$21.91, 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 McMillan Shakespeare’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.
Can we expect growth from McMillan Shakespeare?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 48% over the next couple of years, the future seems bright for McMillan Shakespeare. 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 MMS’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 financial strength of the company. 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 MMS, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.