Mainstreet Equity Corp. (TSE:MEQ), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$193 at one point, and dropping to the lows of CA$160. 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 Mainstreet Equity's current trading price of CA$169 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 Mainstreet Equity’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 Mainstreet Equity

Is Mainstreet Equity Still Cheap?

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 Mainstreet Equity’s ratio of 8.93x is trading slightly below its industry peers’ ratio of 8.93x, which means if you buy Mainstreet Equity today, you’d be paying a decent price for it. And if you believe Mainstreet Equity 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 Mainstreet Equity’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 Mainstreet Equity generate?

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. Though in the case of Mainstreet Equity, it is expected to deliver a highly negative earnings growth in the upcoming, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, MEQ 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 reduce the risk in 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 MEQ, take a look at whether its fundamentals have changed.