The Middleby Corporation (NASDAQ:MIDD), is not the largest company out there, but it led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Middleby’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Middleby worth?
The stock is currently trading at US$96.71 on the share market, which means it is overvalued by 21% compared to my intrinsic value of $79.80. This means that the opportunity to buy Middleby at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Middleby’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.
What kind of growth will Middleby generate?
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. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Middleby. 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? MIDD’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 MIDD 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 tabs on MIDD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for MIDD, 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 Middleby, you’d also look into what risks it is currently facing. Our analysis shows 2 warning signs for Middleby (1 makes us a bit uncomfortable!) and we strongly recommend you look at these before investing.
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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. 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.
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