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Medibank Private Ltd hits $2.30: Is the stock still a buy?

Shares of the newly-listed Medibank Private Ltd (ASX: MPL) are performing nicely with the stock having today reached a fresh high at $2.30.

Although many investors had expected the stock to reach that price on the day of the IPO, it has instead risen gradually with retail investors who purchased shares in the float at $2 now sitting on a 15% gain. Not a bad return in just over two weeks.

At its current price, the stock appears to be trading around, or perhaps a little above ‘fair value’.

Indeed, there is plenty of hype built into the shares. Some investors are hoping the company will greatly improve costs and operating margins to justify its high valuation, while others are anticipating similar long-term returns to those seen from other government-listed companies such as Commonwealth Bank of Australia (ASX: CBA) and CSL Limited (ASX: CSL).

To improve your chances of recognising market-beating returns however, investors should consider holding off from buying Medibank shares until they fall to a more attractive price. Although Medibank’s shares could continue to rise, the shares possess almost no margin of safety, and could just as easily retreat in price. Until then, there are plenty of other opportunities presenting themselves that are far more compelling buys than Medibank right now.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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