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Monash IVF Group Limited (ASX:MVF), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the ASX. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Monash IVF Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Monash IVF Group
What's The Opportunity In Monash IVF Group?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 23.37x is currently trading in-line with its industry peers’ ratio, which means if you buy Monash IVF Group today, you’d be paying a relatively sensible price for it. Although, there may be an opportunity to buy in the future. This is because Monash IVF Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Monash IVF Group?
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 57% over the next couple of years, the future seems bright for Monash IVF Group. 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 MVF’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MVF? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on MVF, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MVF, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.