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McBride plc (LON:MCB), might not be a large cap stock, but it saw a decent share price growth of 19% on the LSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine McBride’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for McBride
Is McBride Still Cheap?
Great news for investors – McBride is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.86x is currently well-below the industry average of 18.16x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, McBride’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of McBride 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. With profit expected to grow by 81% over the next couple of years, the future seems bright for McBride. 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? Since MCB is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on MCB for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MCB. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.