Why McKay Securities Plc (LON:MCKS) Could Be A Buy
McKay Securities Plc (LSE:MCKS), a reits company based in United Kingdom, saw a decent share price growth in the teens level on the LSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on McKay Securities’s outlook and valuation to see if the opportunity still exists. View our latest analysis for McKay Securities
Is McKay Securities 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-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that McKay Securities’s ratio of 6.6x is trading slightly below its industry peers’ ratio of 9.52x, which means if you buy McKay Securities today, you’d be paying a fair price for it. And if you believe McKay Securities should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, McKay Securities’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of McKay Securities look like?
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 the company’s future expectations. Though in the case of McKay Securities, it is expected to deliver a negative revenue growth of -11.49% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? MCKS seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MCKS, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MCKS for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on MCKS should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on McKay Securities. You can find everything you need to know about McKay Securities in the latest infographic research report. If you are no longer interested in McKay Securities, 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.
