Is Recticel SA/NV (EBR:REC) Potentially Undervalued?

Recticel SA/NV (EBR:REC), which is in the chemicals business, and is based in Belgium, saw a significant share price rise of over 20% in the past couple of months on the ENXTBR. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Recticel’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Recticel

What's the opportunity in Recticel?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.5% below my intrinsic value, which means if you buy Recticel today, you’d be paying a fair price for it. And if you believe the company’s true value is €8.62, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Recticel’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 Recticel?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 grow by 28% over the next couple of years, the future seems bright for Recticel. 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? REC’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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on REC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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 Recticel. You can find everything you need to know about Recticel in the latest infographic research report. If you are no longer interested in Recticel, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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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. 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. Thank you for reading.