Yahoo Finance Should You Investigate M.D.C. Holdings, Inc. (NYSE:MDC) At US$31.72?
M.D.C. Holdings, Inc. (NYSE:MDC), is not the largest company out there, but it saw a decent share price growth in the teens level on the NYSE over the last few months. 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? Today I will analyse the most recent data on M.D.C. Holdings’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for M.D.C. Holdings
What's The Opportunity In M.D.C. Holdings?
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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that M.D.C. Holdings’s ratio of 3.51x is trading slightly below its industry peers’ ratio of 6.46x, which means if you buy M.D.C. Holdings today, you’d be paying a decent price for it. And if you believe M.D.C. Holdings 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 M.D.C. Holdings’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 M.D.C. Holdings?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for M.D.C. Holdings, at least in the near future.
What This Means For You
Are you a shareholder? Currently, MDC appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MDC, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MDC for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MDC should the price fluctuate below the industry PE ratio.
If you want to dive deeper into M.D.C. Holdings, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for M.D.C. Holdings (2 shouldn't be ignored!) that we believe deserve your full attention.
If you are no longer interested in M.D.C. Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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