At UK£0.13, Is Renold plc (LON:RNO) Worth Looking At Closely?
Renold plc (LON:RNO), which is in the machinery business, and is based in United Kingdom, received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£0.19 at one point, and dropping to the lows of UK£0.13. 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 Renold's current trading price of UK£0.13 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 Renold’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Renold
What is Renold worth?
Great news for investors – Renold is still trading at a fairly cheap price. 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 3.83x is currently well-below the industry average of 17.61x, meaning that it is trading at a cheaper price relative to its peers. However, given that Renold’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Renold generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -9.0% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Renold. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although RNO is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to RNO, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on RNO for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Renold. You can find everything you need to know about Renold in the latest infographic research report. If you are no longer interested in Renold, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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