Should You Think About Buying Mercury Systems, Inc. (NASDAQ:MRCY) Now?
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Mercury Systems, Inc. (NASDAQ:MRCY), which is in the aerospace & defense 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 NASDAQGS. 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. But what if there is still an opportunity to buy? Let’s take a look at Mercury Systems’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Mercury Systems
What is Mercury Systems worth?
Mercury Systems appears to be overvalued according to my relative valuation model. 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 72.98x is currently well-above the industry average of 22.68x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that Mercury Systems’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 Mercury Systems generate?
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 the company's future expectations. Mercury Systems’s earnings over the next few years are expected to increase by 77%, 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? MRCY’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MRCY should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 an eye on MRCY for a while, 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 positive outlook is encouraging for MRCY, which means it’s worth diving deeper into other factors 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 Mercury Systems. You can find everything you need to know about Mercury Systems in the latest infographic research report. If you are no longer interested in Mercury Systems, 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.
