Mortgage Choice (MOC) is the second worst performer on the Uncapped 100 today with the stock suffering its biggest one-day selloff in nearly a year.
Investors rushed for the exits when management said at its annual general meeting today that it was expecting “modest improvement” in its core broking business for the current financial year.
The word modest isn’t enough to justify the premiums the stock is trading at, especially since it closed at a 6½-year high yesterday.
Even with today’s 7.8% crash to $2.96, the stock is still trading on a one-year forward price-earnings estimate of 18.5 times. Not even investors’ favourite bank, Commonwealth Bank of Australia (CBA), can command such a premium in this market as CBA is “only” fetching a P/E of 15 times.
In fact, the thrift and mortgage sector is trading around 15 times on a one year forecast P/E and Mortgage Choice’s share price is well ahead of the average broker price target of $2.62.
No doubt takeover speculation is providing some support since Tom Elliot highlighted its corporate appeal, but management will need to give a much rosier outlook if the stock is to break comfortably above $3.