At US$76.82, Is McGrath RentCorp (NASDAQ:MGRC) Worth Looking At Closely?

By
Simply Wall St
Published
October 25, 2021
NasdaqGS:MGRC
Source: Shutterstock

McGrath RentCorp (NASDAQ:MGRC), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. 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 take a look at McGrath RentCorp’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for McGrath RentCorp

What is McGrath RentCorp worth?

According to my valuation model, McGrath RentCorp seems to be fairly priced at around 19% below my intrinsic value, which means if you buy McGrath RentCorp today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $94.52, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, McGrath RentCorp’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will McGrath RentCorp generate?

earnings-and-revenue-growth
NasdaqGS:MGRC Earnings and Revenue Growth October 26th 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. 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. With profit expected to grow by 29% over the next couple of years, the future seems bright for McGrath RentCorp. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in MGRC’s positive outlook, 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 tabs on MGRC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of McGrath RentCorp.

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

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