Is It Too Late To Consider Buying Medical Facilities Corporation (TSE:DR)?

By
Simply Wall St
Published
May 13, 2022
TSX:DR
Source: Shutterstock

Medical Facilities Corporation (TSE:DR), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$12.03 and falling to the lows of CA$8.82. 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 Medical Facilities' current trading price of CA$8.82 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 Medical Facilities’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Medical Facilities

What's the opportunity in Medical Facilities?

Good news, investors! Medical Facilities is still a bargain right now according to my price multiple model, which compares 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 Medical Facilities’s ratio of 13.46x is below its peer average of 33.29x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Medical Facilities’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Medical Facilities look like?

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TSX:DR Earnings and Revenue Growth May 13th 2022

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. Medical Facilities' earnings over the next few years are expected to increase by 84%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since DR is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 DR for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DR. 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 assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Medical Facilities has 3 warning signs and it would be unwise to ignore them.

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

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