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While Morguard Corporation (TSE:MRC) might not have the largest market cap around , it saw significant share price movement during recent months on the TSX, rising to highs of CA$126 and falling to the lows of CA$112. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Morguard's current trading price of CA$112 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 Morguard’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Morguard
What's The Opportunity In Morguard?
Good news, investors! Morguard is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to 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 Morguard’s ratio of 6.1x is below its peer average of 11.73x, which indicates the stock is trading at a lower price compared to the Real Estate industry. However, given that Morguard’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Morguard?
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. However, with an expected decline of -2.3% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Morguard. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although MRC is currently trading below the industry PE ratio, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to MRC, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on MRC for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.