Stock Analysis

Should You Investigate Mayfield Childcare Limited (ASX:MFD) At AU$1.46?

ASX:MFD
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Mayfield Childcare Limited (ASX:MFD), might not be a large cap stock, but it 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

Is Mayfield Childcare still cheap?

Great news for investors – Mayfield Childcare is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is A$2.12, but it is currently trading at AU$1.46 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Mayfield Childcare’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of Mayfield Childcare look like?

earnings-and-revenue-growth
ASX:MFD Earnings and Revenue Growth May 24th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Mayfield Childcare's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since MFD is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 undervaluation.

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 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 buy.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 5 warning signs for Mayfield Childcare (1 is potentially serious!) that we believe deserve your full attention.

If you are no longer interested in Mayfield Childcare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Valuation is complex, but we're helping make it simple.

Find out whether Mayfield Childcare is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.