Is Now An Opportune Moment To Examine The Royal Bank of Scotland Group plc (LON:RBS)?

Today we’re going to take a look at the well-established The Royal Bank of Scotland Group plc (LON:RBS). The company’s stock received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£2.61 at one point, and dropping to the lows of UK£2.13. 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 Royal Bank of Scotland Group’s current trading price of UK£2.17 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Royal Bank of Scotland Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Royal Bank of Scotland Group

What is Royal Bank of Scotland Group worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.62% above my intrinsic value, which means if you buy Royal Bank of Scotland Group today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth £1.98, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Royal Bank of Scotland Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Royal Bank of Scotland Group generate?

LSE:RBS Past and Future Earnings, February 5th 2020
LSE:RBS Past and Future Earnings, February 5th 2020

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. Royal Bank of Scotland Group’s earnings over the next few years are expected to increase by 46%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? RBS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on RBS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Royal Bank of Scotland Group. You can find everything you need to know about Royal Bank of Scotland Group in the latest infographic research report. If you are no longer interested in Royal Bank of Scotland Group, 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.