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Is Now An Opportune Moment To Examine M.D.C. Holdings, Inc. (NYSE:MDC)?

Simply Wall St

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M.D.C. Holdings, Inc. (NYSE:MDC), which is in the consumer durables business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at M.D.C. Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for M.D.C. Holdings

What's the opportunity in M.D.C. Holdings?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 9.58x is currently trading slightly below its industry peers’ ratio of 14.03x, which means if you buy M.D.C. Holdings today, you’d be paying a fair price for it. And if you believe M.D.C. Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since M.D.C. Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of M.D.C. Holdings look like?

NYSE:MDC Past and Future Earnings, July 3rd 2019

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. Though in the case of M.D.C. Holdings, it is expected to deliver a negative earnings growth of -4.5%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? MDC seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MDC, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MDC for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on MDC should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on M.D.C. Holdings. You can find everything you need to know about M.D.C. Holdings in the latest infographic research report. If you are no longer interested in M.D.C. Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.