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Mayfield Childcare Limited (ASX:MFD), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.40 and falling to the lows of AU$1.06. 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 Mayfield Childcare's current trading price of AU$1.10 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 Mayfield Childcare’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 Mayfield Childcare
What's The Opportunity In Mayfield Childcare?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15% below my intrinsic value, which means if you buy Mayfield Childcare today, you’d be paying a fair price for it. And if you believe the company’s true value is A$1.28, then there’s not much of an upside to gain from mispricing. Furthermore, Mayfield Childcare’s low beta implies that the stock is less volatile than the wider market.
What kind of growth will Mayfield Childcare generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 98% over the next year, the near-term future seems bright for Mayfield Childcare. 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 MFD’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 track record of its management team. 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 MFD, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.