McDermott International Inc (NYSE:MDR), an energy company based in United States, led the NYSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at McDermott International’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for McDermott International
Is McDermott International still cheap?
According to my valuation model, McDermott International seems to be fairly priced at around 5.08% below my intrinsic value, which means if you buy McDermott International today, you’d be paying a fair price for it. And if you believe that the stock is really worth $7.18, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that McDermott International’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 McDermott International generate?
NYSE:MDR Future Profit May 9th 18 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. However, with a negative profit growth of -17.01% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for McDermott International. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, MDR appears to be trading around its fair value, 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on MDR for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which 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 crystalize your views on MDR should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on McDermott International. You can find everything you need to know about McDermott International in the latest infographic research report. If you are no longer interested in McDermott International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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