Mayville Engineering Company, Inc. (NYSE:MEC), 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$21.81 at one point, and dropping to the lows of US$15.85. 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 Mayville Engineering Company's current trading price of US$15.85 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 Mayville Engineering Company's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Mayville Engineering Company
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Mayville Engineering Company's ratio of 26.77x is trading slightly above its industry peers' ratio of 22.68x, which means if you buy Mayville Engineering Company today, you'd be paying a relatively sensible price for it. And if you believe that Mayville Engineering Company should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Mayville Engineering Company's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
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. Though in the case of Mayville Engineering Company, it is expected to deliver a negative earnings growth of -1.2%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
Are you a shareholder? Currently, MEC 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 de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MEC, take a look at whether its fundamentals have changed.