Is It Too Late To Consider Buying Mayfield Childcare Limited (ASX:MFD)?

Mayfield Childcare Limited (ASX:MFD), which is in the consumer services business, and is based in Australia, received a lot of attention from a substantial price increase on the ASX over the last few months. As a small cap stock, hardly covered by any analysts, 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 Mayfield Childcare’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Mayfield Childcare

What's the opportunity in Mayfield Childcare?

Great news for investors – Mayfield Childcare is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 Mayfield Childcare’s ratio of 7.56x is below its peer average of 12.6x, which indicates the stock is trading at a lower price compared to the Consumer Services industry. However, given that Mayfield Childcare’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Mayfield Childcare?

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 34% over the next couple of years, the future seems bright for Mayfield Childcare. 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? Since MFD is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on MFD for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MFD. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Mayfield Childcare. You can find everything you need to know about Mayfield Childcare in the latest infographic research report. If you are no longer interested in Mayfield Childcare, you can use our free platform to see my 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. Thank you for reading.