MainStreet Bancshares, Inc. (NASDAQ:MNSB), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to $24 at one point, and dropping to the lows of $19.75. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether MainStreet Bancshares's current trading price of $21.7 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MainStreet Bancshares’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in MainStreet Bancshares?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that MainStreet Bancshares’s ratio of 13.46x is trading slightly above its industry peers’ ratio of 12.61x, which means if you buy MainStreet Bancshares today, you’d be paying a relatively fair price for it. And if you believe MainStreet Bancshares should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like MainStreet Bancshares’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of MainStreet Bancshares look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. MainStreet Bancshares’s earnings growth are expected to be in the teens in the upcoming year, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? MNSB’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MNSB? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on MNSB, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for MNSB, 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 MainStreet Bancshares. You can find everything you need to know about MainStreet Bancshares in the latest infographic research report. If you are no longer interested in MainStreet Bancshares, 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 firstname.lastname@example.org. 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.