Why Medartis Holding AG (VTX:MED) Could Be Worth Watching

Medartis Holding AG (VTX:MED), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SWX over the last few months. Less-covered, small caps sees 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 Medartis Holding’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Our analysis indicates that MED is potentially undervalued!

Is Medartis Holding Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 20% below my intrinsic value, which means if you buy Medartis Holding today, you’d be paying a fair price for it. And if you believe the company’s true value is CHF93.20, then there’s not much of an upside to gain from mispricing. What's more, Medartis Holding’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Medartis Holding generate?

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. In Medartis Holding's case, its revenues over the next few years are expected to grow by 64%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? MED’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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on MED, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Medartis Holding at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Medartis Holding.

If you are no longer interested in Medartis Holding, 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.