Investors continued to increase their bids for shares of the freshly listed Medibank Private Ltd (ASX: MPL) last week, pushing the stock to a record high of $2.44 on Thursday before it ended the week at $2.43.
As can be seen from the chart below, Medibank shares have been a boon for investors who purchased their shares in the float. While the stock opened at $2.22 on November 25, the shares had been capped at $2.00 for retail investors, meaning those shareholders are now sitting on a paper profit of 21.5% after just five-and-a-half weeks.
Source: Google Finance
Despite its success to date however, investors need to remain wary of Medibank. In order to justify its current P/E ratio of 25.9 times earnings, Medibank will need to greatly reduce its costs whilst also improving its efficiency. Should it fall short of investors' high expectations, we could certainly see the stock fall from its current high price, which may be a better time to consider buying.
Until then, there are plenty of other compelling opportunities which could deliver even greater gains than Medibank over the coming years.
