Mercantile Bank Corporation (NASDAQ:MBWM), operating in the financial services industry based in United States, led the NasdaqGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at MBWM’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for Mercantile Bank
What's the opportunity in MBWM?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that MBWM’s ratio of 18.7x is trading slightly above its industry peers’ ratio of 18.6x, which means if you buy MBWM today, you’d be paying a relatively reasonable price for it. And if you believe MBWM should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, it seems like MBWM’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because MBWM’s stock is less volatile than the wider market given its low beta.
Can we expect growth from MBWM?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 MBWM future expectations. Though in the case of MBWM, it is expected to deliver a relatively unexciting earnings growth of 6.02%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for MBWM, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MBWM’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at MBWM? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on MBWM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for MBWM, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 Mercantile Bank. You can find everything you need to know about MBWM in the latest infographic research report. If you are no longer interested in Mercantile 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.