What Is MSC Industrial Direct Co., Inc.'s (NYSE:MSM) Share Price Doing?

While MSC Industrial Direct Co., Inc. (NYSE:MSM) might not have the largest market cap around , it saw a decent share price growth of 11% on the NYSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at MSC Industrial Direct’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for MSC Industrial Direct

Is MSC Industrial Direct Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 18.57x is currently trading slightly below its industry peers’ ratio of 18.57x, which means if you buy MSC Industrial Direct today, you’d be paying a reasonable price for it. And if you believe that MSC Industrial Direct should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like MSC Industrial Direct’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will MSC Industrial Direct generate?

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. With profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive for MSC Industrial Direct. 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 MSM’s positive outlook, with shares trading around industry price multiples. 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 MSM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on MSM, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for MSM, 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 MSC Industrial Direct 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 MSC Industrial Direct.

If you are no longer interested in MSC Industrial Direct, 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.