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Marcus & Millichap, Inc. (NYSE:MMI), which is in the real estate business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Marcus & Millichap’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Marcus & Millichap still cheap?
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 Marcus & Millichap’s ratio of 16.87x is trading slightly below its industry peers’ ratio of 18.82x, which means if you buy Marcus & Millichap today, you’d be paying a fair price for it. And if you believe that Marcus & Millichap should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Marcus & Millichap’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.
Can we expect growth from Marcus & Millichap?
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. Though in the case of Marcus & Millichap, it is expected to deliver a relatively unexciting earnings growth of 2.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MMI’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at MMI? 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 MMI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean 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 Marcus & Millichap. You can find everything you need to know about Marcus & Millichap in the latest infographic research report. If you are no longer interested in Marcus & Millichap, 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.