Is Regis Healthcare Limited (ASX:REG) Potentially Undervalued?

Regis Healthcare Limited (ASX:REG), might not be a large cap stock, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$2.37 and falling to the lows of AU$1.85. 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 Regis Healthcare's current trading price of AU$2.00 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 Regis Healthcare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Regis Healthcare

Is Regis Healthcare still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13% below my intrinsic value, which means if you buy Regis Healthcare today, you’d be paying a fair price for it. And if you believe the company’s true value is A$2.29, 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 Regis Healthcare’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.

What does the future of Regis Healthcare look like?

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. Regis Healthcare's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 REG’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 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 REG, 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.

If you want to dive deeper into Regis Healthcare, you'd also look into what risks it is currently facing. At Simply Wall St, we found 3 warning signs for Regis Healthcare and we think they deserve your attention.

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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.
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