Is It Time To Consider Buying Mister Car Wash, Inc. (NASDAQ:MCW)?

Mister Car Wash, Inc. (NASDAQ:MCW), might not be a large cap stock, but it saw a decent share price growth of 13% on the NASDAQGS over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Mister Car Wash’s outlook and valuation to see if the opportunity still exists.

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What's The Opportunity In Mister Car Wash?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 27.48x is currently well-above the industry average of 19.13x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Mister Car Wash’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

See our latest analysis for Mister Car Wash

What kind of growth will Mister Car Wash generate?

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. Mister Car Wash's earnings over the next few years are expected to increase by 82%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? MCW’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MCW should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 an eye on MCW for a while, 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 outlook is encouraging for MCW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Mister Car Wash, and understanding it should be part of your investment process.

If you are no longer interested in Mister Car Wash, 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.