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Macatawa Bank Corporation (NASDAQ:MCBC), operating in the financial services industry based in United States, saw a significant share price rise of over 20% in the past couple of months on the NasdaqGS. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Macatawa Bank’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for Macatawa Bank
What is Macatawa Bank worth?
Macatawa Bank is currently overpriced based on my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 24.18x is currently well-above the industry average of 16.99x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Macatawa Bank’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Macatawa Bank 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. 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. In the upcoming year, Macatawa Bank’s earnings are expected to increase by 43.90%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in MCBC’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MCBC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on MCBC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for MCBC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Macatawa Bank. You can find everything you need to know about Macatawa Bank in the latest infographic research report. If you are no longer interested in Macatawa Bank, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.