The Medicines Company (NASDAQ:MDCO), a pharmaceuticals company based in United States, received a lot of attention from a substantial price increase on the NasdaqGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Medicines’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Medicines
What is Medicines worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14% above my intrinsic value, which means if you buy Medicines today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $30.48, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Medicines’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Medicines 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. Medicines’s earnings over the next few years are expected to increase by 51.40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MDCO’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 confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on MDCO, now may not be the most advantageous 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.