At AU$0.25, Is It Time To Put Mosaic Brands Limited (ASX:MOZ) On Your Watch List?

Mosaic Brands Limited (ASX:MOZ), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the ASX. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Mosaic Brands’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Mosaic Brands

Is Mosaic Brands still cheap?

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 6.64x is currently trading slightly below its industry peers’ ratio of 8.69x, which means if you buy Mosaic Brands today, you’d be paying a decent price for it. And if you believe that Mosaic Brands should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Mosaic Brands’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

Can we expect growth from Mosaic Brands?

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. Mosaic Brands' 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? MOZ’s optimistic future growth appears to have been factored into the current share price, 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 MOZ? 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 MOZ, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MOZ, which 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 want to dive deeper into Mosaic Brands, you'd also look into what risks it is currently facing. Be aware that Mosaic Brands is showing 6 warning signs in our investment analysis and 2 of those don't sit too well with us...

If you are no longer interested in Mosaic Brands, 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.