MBIA Inc (NYSE:MBI), a insurance company based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $10.55 and falling to the lows of $8.87. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether MBI's current trading price of $9.65 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 MBI’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for MBI
What is MBI worth?
According to my relative valuation model, MBI seems to be currently fairly priced. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.6x is currently trading slightly below its industry peers’ ratio of 2x, which means if you buy MBI today, you’d be paying a relatively fair price for it. And if you believe that MBI should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that MBI’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from MBI?
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 MBI future expectations. With profit expected to grow by 55.22% over the next year, the near-term future seems bright for MBI. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MBI’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 financial strength of the company. Have these factors changed since the last time you looked at MBI? 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 MBI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for MBI, which means it’s worth diving deeper into 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 MBIA. You can find everything you need to know about MBI in the latest infographic research report. If you are no longer interested in MBIA, 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.