Monro, Inc. (NASDAQ:MNRO), might not be a large cap stock, but it saw a significant share price rise of 28% in the past couple of months on the NASDAQGS. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. However, what if the stock is still a bargain? Let's examine Monro's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is Monro Worth?
Great news for investors – Monro is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is $34.38, but it is currently trading at US$27.04 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Monro's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Monro look like?
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. 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 -0.9% expected next year, near-term growth certainly doesn't appear to be a driver for a buy decision for Monro. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although MNRO is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to MNRO, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on MNRO for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Monro and we think they deserve your attention.
If you are no longer interested in Monro, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.