Why Pediatrix Medical Group, Inc. (NYSE:MD) Could Be Worth Watching

Pediatrix Medical Group, Inc. (NYSE:MD), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$23.15 and falling to the lows of US$15.18. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Pediatrix Medical Group's current trading price of US$15.61 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Pediatrix Medical Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out the opportunities and risks within the US Healthcare industry.

Is Pediatrix Medical Group Still Cheap?

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 16.22x is currently trading slightly below its industry peers’ ratio of 20.08x, which means if you buy Pediatrix Medical Group today, you’d be paying a decent price for it. And if you believe Pediatrix Medical Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Pediatrix Medical Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Pediatrix Medical Group?

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. Pediatrix Medical Group's earnings over the next few years are expected to increase by 83%, 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? It seems like the market has already priced in MD’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 financial strength of the company. Have these factors changed since the last time you looked at MD? 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 tabs on MD, 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 MD, 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.

So while earnings quality is important, it's equally important to consider the risks facing Pediatrix Medical Group at this point in time. When we did our research, we found 2 warning signs for Pediatrix Medical Group (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in Pediatrix Medical Group, 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.