M.D.C. Holdings, Inc. (NYSE:MDC), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$37.30 and falling to the lows of US$28.26. 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$29.38 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.

View our latest analysis for M.D.C. Holdings

What Is M.D.C. Holdings Worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 3.25x is currently trading slightly below its industry peers' ratio of 7.04x, 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. So, is there another chance to buy low in the future? 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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of M.D.C. Holdings look like?

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 a negative profit growth of -17% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for M.D.C. Holdings. This certainty tips the risk-return scale towards higher risk.

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 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 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 advantageous time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. In addition to this, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with M.D.C. Holdings (including 2 which can't be ignored).

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.