M.D.C. Holdings, Inc. (NYSE:MDC), is not the largest company out there, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$62.13 at one point, and dropping to the lows of US$51.54. 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 M.D.C. Holdings' current trading price of US$56.68 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at M.D.C. Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is M.D.C. Holdings still cheap?
Great news for investors – M.D.C. Holdings is still trading at a fairly cheap price 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 8.93x is currently well-below the industry average of 15.35x, meaning that it is trading at a cheaper price relative to its peers. However, given that M.D.C. Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will M.D.C. Holdings 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 43% over the next year, the near-term future seems bright for M.D.C. Holdings. 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? Since MDC is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on MDC for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MDC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
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 3 warning signs for M.D.C. Holdings (1 is a bit unpleasant!) 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.
This article by Simply Wall St is general in nature. 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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