Is Now An Opportune Moment To Examine MaxiPARTS Limited (ASX:MXI)?

MaxiPARTS Limited (ASX:MXI), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$3.98 and falling to the lows of AU$3.00. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether MaxiPARTS' current trading price of AU$3.00 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 MaxiPARTS’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 MaxiPARTS

What's the opportunity in MaxiPARTS?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 19.52x is currently trading slightly below its industry peers’ ratio of 24.17x, which means if you buy MaxiPARTS today, you’d be paying a reasonable price for it. And if you believe MaxiPARTS should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like MaxiPARTS’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of MaxiPARTS look like?

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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for MaxiPARTS. 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? It seems like the market has already priced in MXI’s positive outlook, with shares trading around industry price multiples. 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 MXI? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on MXI, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MXI, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 3 warning signs for MaxiPARTS you should know about.

If you are no longer interested in MaxiPARTS, 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.