Should You Buy Mesoblast Limited (ASX:MSB)?
Mesoblast Limited (ASX:MSB), a biotechnology company based in Australia, received a lot of attention from a substantial price increase on the ASX in the over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at MSB’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Mesoblast
What's the opportunity in MSB?
Good news, investors! MSB is still a bargain right now. In this instance, I’ve used price-to-book ratio (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that MSB’s ratio of 1.2x is below its peer average of 3.8x, which suggests the stock is undervalued compared to the biotechnology industry. Although, there may be another chance to buy again in the future. This is because MSB’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, MSB’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of MSB look like?
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. MSB’s earnings over the next few years are expected to increase by 20.28%, 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? Since MSB is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 undervaluation.
Are you a potential investor? If you’ve been keeping an eye on MSB for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MSB. 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 buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Mesoblast. You can find everything you need to know about MSB in the latest infographic research report. If you are no longer interested in Mesoblast, 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.
