McGrath RentCorp (NASDAQ:MGRC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine McGrath RentCorp’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for McGrath RentCorp

Is McGrath RentCorp still cheap?

Good news, investors! McGrath RentCorp is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $128.41, but it is currently trading at US$78.58 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, McGrath RentCorp’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of McGrath RentCorp look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 relatively muted profit growth of 9.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for McGrath RentCorp, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since MGRC is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on MGRC for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MGRC. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing McGrath RentCorp at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of McGrath RentCorp.

If you are no longer interested in McGrath RentCorp, 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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