Reading International, Inc. (NASDAQ:RDI), which is in the entertainment business, and is based in United States, received a lot of attention from a substantial price movement on the NASDAQCM over the last few months, increasing to US$13.56 at one point, and dropping to the lows of US$11.65. 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 Reading International’s current trading price of US$11.96 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 Reading International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Reading International still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Reading International’s ratio of 41.78x is trading in-line with its industry peers’ ratio, which means if you buy Reading International today, you’d be paying a relatively fair price for it. So, is there another chance to buy low in the future? Given that Reading International’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Reading International?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Reading International. 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 RDI’s positive outlook, with shares trading around its fair value. 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 RDI? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on RDI, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for RDI, 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 Reading International. You can find everything you need to know about Reading International in the latest infographic research report. If you are no longer interested in Reading International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.