Yahoo Finance What Does Reliance Worldwide Corporation Limited's (ASX:RWC) Share Price Indicate?
Reliance Worldwide Corporation Limited (ASX:RWC), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$3.70 and falling to the lows of AU$2.83. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Reliance Worldwide's current trading price of AU$2.83 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Reliance Worldwide’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Reliance Worldwide
Is Reliance Worldwide Still Cheap?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 10.78x is currently trading slightly below its industry peers’ ratio of 13.9x, which means if you buy Reliance Worldwide today, you’d be paying a decent price for it. And if you believe Reliance Worldwide should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, Reliance Worldwide’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Reliance Worldwide?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 21% over the next couple of years, the future seems bright for Reliance Worldwide. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in RWC’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at RWC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on RWC, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for RWC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Reliance Worldwide has 2 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Reliance Worldwide, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
