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Morguard Corporation (TSE:MRC), is not the largest company out there, but it maintained its current share price over the past couple of month on the TSX, with a relatively tight range of CA$110 to CA$114. However, does this price actually reflect the true 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.
View our latest analysis for Morguard
What Is Morguard Worth?
Great news for investors – Morguard 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. 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 5.06x is below its peer average of 7.21x, 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.
What kind of growth will Morguard 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. However, with an expected decline of -9.4% in revenues over the next year, short term growth isn’t 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. We recommend you think about 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.