Should You Investigate MAV Beauty Brands Inc. (TSE:MAV) At CA$3.06?
MAV Beauty Brands Inc. (TSE:MAV), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the TSX. As a 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? Let’s examine MAV Beauty Brands’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for MAV Beauty Brands
What's the opportunity in MAV Beauty Brands?
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 MAV Beauty Brands’s ratio of 18.6x is trading slightly below its industry peers’ ratio of 19.18x, which means if you buy MAV Beauty Brands today, you’d be paying a decent price for it. And if you believe MAV Beauty Brands 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. So, is there another chance to buy low in the future? Given that MAV Beauty Brands’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will MAV Beauty Brands 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. In MAV Beauty Brands’s case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger 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 MAV’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 track record of its management team. Have these factors changed since the last time you looked at MAV? 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 MAV, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for MAV, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 4 warning signs for MAV Beauty Brands (1 is potentially serious!) that we believe deserve your full attention.
If you are no longer interested in MAV Beauty Brands, 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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