Advertisement
U.S. markets open in 56 minutes
  • S&P Futures

    5,306.75
    -1.50 (-0.03%)
     
  • Dow Futures

    40,158.00
    +14.00 (+0.03%)
     
  • Nasdaq Futures

    18,498.25
    -5.50 (-0.03%)
     
  • Russell 2000 Futures

    2,140.10
    +1.70 (+0.08%)
     
  • Crude Oil

    82.60
    +1.25 (+1.54%)
     
  • Gold

    2,232.20
    +19.50 (+0.88%)
     
  • Silver

    24.68
    -0.07 (-0.27%)
     
  • EUR/USD

    1.0794
    -0.0035 (-0.32%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Vix

    13.01
    +0.23 (+1.80%)
     
  • GBP/USD

    1.2625
    -0.0014 (-0.11%)
     
  • USD/JPY

    151.3440
    +0.0980 (+0.06%)
     
  • Bitcoin USD

    70,460.73
    +222.16 (+0.32%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.37
    +20.39 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Is Now The Time To Look At Buying Melcor Developments Ltd. (TSE:MRD)?

While Melcor Developments Ltd. (TSE:MRD) might not be the most widely known stock at the moment, it maintained its current share price over the past couple of month on the TSX, with a relatively tight range of CA$13.90 to CA$14.95. However, does this price actually reflect the true value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Melcor Developments’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Melcor Developments

What is Melcor Developments worth?

Melcor Developments is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 Melcor Developments’s ratio of 41.3x is above its peer average of 14.22x, which suggests the stock is trading at a higher price compared to the Real Estate industry. But, is there another opportunity to buy low in the future? Given that Melcor Developments’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Melcor Developments generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

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. With revenues expected to grow by 56% over the next couple of years, the future seems bright for Melcor Developments. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? MRD’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe MRD should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 tabs on MRD for some time, 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 MRD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Melcor Developments, you'd also look into what risks it is currently facing. For instance, we've identified 4 warning signs for Melcor Developments (2 are a bit concerning) you should be familiar with.

If you are no longer interested in Melcor Developments, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Advertisement