McGrath RentCorp (NASDAQ:MGRC), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. 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? Today I will analyse the most recent data on McGrath RentCorp’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for McGrath RentCorp
What’s the opportunity in McGrath RentCorp?
According to my valuation model, McGrath RentCorp seems to be fairly priced at around 15% below my intrinsic value, which means if you buy McGrath RentCorp today, you’d be paying a fair price for it. And if you believe the company’s true value is $71.04, then there isn’t much room for the share price grow beyond what it’s currently trading. What’s more, McGrath RentCorp’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of McGrath RentCorp 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 3.7% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for McGrath RentCorp, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MGRC’s future 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 the stock? 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 an eye on MGRC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you’d like to know more about McGrath RentCorp as a business, it’s important to be aware of any risks it’s facing. At Simply Wall St, we found 2 warning signs for McGrath RentCorp and we think they deserve your attention.
If you are no longer interested in McGrath RentCorp, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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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