Mineral & Financial Investments Limited (AIM:MAFL), a GBP£3.82M small-cap, operates in the capital markets industry, which has been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, negative growth in the upcoming year, and Today, I’ll take you through the sector growth expectations, as well as evaluate whether MAFL is lagging or leading in the industry. View our latest analysis for Mineral & Financial Investments
What’s the catalyst for MAFL's sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth of 2.85%, beating the UK market growth of 1.54%. MAFL leads the pack with its impressive earnings growth of 53.28% over the past year. This proven growth may make MAFL a more expensive stock relative to its peers.
Is MAFL and the sector relatively cheap?
The capital markets industry is trading at a PE ratio of 16x, relatively similar to the rest of the UK stock market PE of 18x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12.90% on equities compared to the market’s 12.78%. Since MAFL’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge MAFL’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? MAFL recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto MAFL as part of your portfolio. However, if you’re relatively concentrated in capital markets, you may want to value MAFL based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If MAFL has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the capital markets industry. Before you make a decision on the stock, take a look at MAFL’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Mineral & Financial Investments's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.