It's been a volatile few days for shareholders of Australia's largest listed private health insurer Medibank Private Ltd (ASX: MPL).
After hitting a new all-time high of $3.32 on Thursday, on Friday Medibank's shares came under selling pressure and slumped 5.5% to $3.10.
Monday morning has seen a reversal of Friday's selling with the stock up 2.6% to $3.18.
For initial public offer (IPO) investors the decision to invest in Medibank has obviously been a great one considering shares in the float were issued at $2 thereby providing a profit-to-date of over 50%.
Likewise, nearly all investor who have acquired stock on-market post IPO are sitting on gains.
Whilst shareholders will be pleased with both the absolute returns and the significant outperformance relative to the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), the question which shareholders must now ponder is as follows:
Is it time to take profits?
Medibank's share price has certainly run hard and currently the stock is priced on a financial year (FY) 2016 price-to-earnings multiple of 22 times (based on consensus data provided by CommSec).
That's a hefty multiple – particularly considering CommSec's consensus forecast shows earnings growth in FY 2017 of just under 7% – arguably implying that the stock is well-and-truly fully priced.
