Stock Analysis

What Is MotorCycle Holdings Limited's (ASX:MTO) Share Price Doing?

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ASX:MTO
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MotorCycle Holdings Limited (ASX:MTO), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$2.73 and falling to the lows of AU$2.28. 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 MotorCycle Holdings' current trading price of AU$2.40 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 MotorCycle Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for MotorCycle Holdings

What is MotorCycle Holdings worth?

According to my valuation model, MotorCycle Holdings seems to be fairly priced at around 9.4% below my intrinsic value, which means if you buy MotorCycle Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is A$2.65, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since MotorCycle Holdings’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.

What does the future of MotorCycle Holdings look like?

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ASX:MTO Earnings and Revenue Growth March 1st 2021

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. MotorCycle Holdings' 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? MTO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 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 MTO, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that MotorCycle Holdings is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

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