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Mortgage Advice Bureau (Holdings) PLC (LON:MAB1), operating in the financial services industry based in United Kingdom, saw a decent share price growth in the teens level on the AIM 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? Let’s take a look at Mortgage Advice Bureau (Holdings)’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Mortgage Advice Bureau (Holdings) worth?According to my relative valuation model, the stock is currently overvalued. 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 22.9x is currently well-above the industry average of 7.16x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Mortgage Advice Bureau (Holdings)’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 true value, 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 Mortgage Advice Bureau (Holdings) look like?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. Though in the case of Mortgage Advice Bureau (Holdings), it is expected to deliver a relatively unexciting earnings growth of 6.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Mortgage Advice Bureau (Holdings), at least in the near term.
What this means for you:
Are you a shareholder? MAB1’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe MAB1 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MAB1 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Mortgage Advice Bureau (Holdings). You can find everything you need to know about Mortgage Advice Bureau (Holdings) in the latest infographic research report. If you are no longer interested in Mortgage Advice Bureau (Holdings), you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.