MainStreet Bancshares, Inc. (NASDAQ:MNSB), operating in the financial services industry based in United States, saw a decent share price growth in the teens level on the NASDAQCM 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 MainStreet Bancshares’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is MainStreet Bancshares still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 MainStreet Bancshares’s ratio of 13.46x is trading slightly above its industry peers’ ratio of 12.8x, which means if you buy MainStreet Bancshares today, you’d be paying a relatively fair price for it. And if you believe that MainStreet Bancshares should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, MainStreet Bancshares’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of MainStreet Bancshares look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 MainStreet Bancshares, it is expected to deliver a relatively unexciting earnings growth of 6.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for MainStreet Bancshares, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in MNSB’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MNSB? 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 tabs on MNSB, now may not be the most advantageous time to buy, given it is trading around its fair value. 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 MainStreet Bancshares. You can find everything you need to know about MainStreet Bancshares in the latest infographic research report. If you are no longer interested in MainStreet Bancshares, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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