What Is Reliance Worldwide Corporation Limited's (ASX:RWC) Share Price Doing?

By
Simply Wall St
Published
December 10, 2021
ASX:RWC
Source: Shutterstock

Reliance Worldwide Corporation Limited (ASX:RWC), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the ASX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Reliance Worldwide’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Reliance Worldwide

What's the opportunity in Reliance Worldwide?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.7% below my intrinsic value, which means if you buy Reliance Worldwide today, you’d be paying a fair price for it. And if you believe that the stock is really worth A$6.63, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Reliance Worldwide’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 Reliance Worldwide generate?

earnings-and-revenue-growth
ASX:RWC Earnings and Revenue Growth December 10th 2021

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. Reliance Worldwide's earnings over the next few years are expected to increase by 44%, 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? It seems like the market has already priced in RWC’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 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 tabs on RWC, now may not be the most advantageous 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.

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.

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