When Should You Buy MSC Industrial Direct Co., Inc. (NYSE:MSM)?

While MSC Industrial Direct Co., Inc. (NYSE:MSM) might not be the most widely known stock at the moment, it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on MSC Industrial Direct’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for MSC Industrial Direct

What Is MSC Industrial Direct Worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 14.42x is currently trading slightly above its industry peers’ ratio of 12.18x, which means if you buy MSC Industrial Direct today, you’d be paying a relatively sensible price for it. And if you believe MSC Industrial Direct should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. 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. 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. MSC Industrial Direct's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? MSM’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 MSM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

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

It can be quite valuable to consider what analysts expect for MSC Industrial Direct from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

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.