Metlifecare Limited (NZSE:MET), a healthcare company based in New Zealand, saw significant share price volatility over the past couple of months on the NZSE, rising to the highs of NZ$6.27 and falling to the lows of NZ$5.62. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Metlifecare’s current trading price of NZ$6.03 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Metlifecare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Metlifecare
Is Metlifecare still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.11x is currently trading slightly below its industry peers’ ratio of 8.7x, which means if you buy Metlifecare today, you’d be paying a fair price for it. And if you believe Metlifecare should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Metlifecare’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 kind of growth will Metlifecare generate?
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. Though in the case of Metlifecare, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Metlifecare seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on Metlifecare, take a look at whether its fundamentals have changed.