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Is today a good day to buy Medibank Private Ltd?

Following last week’s near 4% decline, Medibank Private Ltd (ASX: MPL) shares have climbed steadily today to be trading 4 cents or 1.7% higher at $2.35 per share, compared to a 0.3% rise from the benchmark S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).

mpl2

Source: Google Finance

Indeed, there has been much debate regarding what the Medibank stock is really worth. While many investors – myself included – were of the belief it was expensive at its $2.00 initial public offer price, others have suggested it will climb as high as $2.62. One analyst from Bank of America Merrill Lynch even has a $3.00 price target for the stock.

While both of those targets are achievable, the insurer would need to show it has made significant progress in reducing costs and improving margins when it delivers its half-year and full-year results in February and August, respectively.

Until it can do so, Medibank Private remains an expensive investment prospect, and one that investors should avoid until such time that the company can justify its current price tag.

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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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