Medibank Private Ltd (ASX: MPL) has given its shareholders an early Christmas present, with the stock climbing to a fresh high today at $2.34.
The stock has been a remarkable performer for investors who were lucky enough to claim a stake in the highly anticipated IPO. While shares were capped at $2.00 for retail investors, institutional investors have since pushed the price higher, ensuring a 17% paper profit for mum-and-dad investors. The stock was floated just under one month ago.
At its current price, Medibank appears to be trading at, or perhaps slightly above fair value. As it stands, the stock is trading on a P/E ratio of roughly 24.3 times forecast FY15 earnings, which seems excessive considering how heavily the company will rely on cost-cutting initiatives and the performance of its investing portfolio to drive its profitability.
While the stock could prove to be an excellent investment in the long run, investors ought to add it to the watchlist for now and turn their attention towards some of the market's more compelling opportunities.
