Should You Think About Buying Regis Healthcare Limited (ASX:REG) Now?

Regis Healthcare Limited (ASX:REG), which is in the healthcare business, and is based in Australia, saw a significant share price rise of over 20% in the past couple of months on the ASX. With many analysts covering the 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? Let’s examine Regis Healthcare’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Regis Healthcare

What's the opportunity in Regis Healthcare?

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 Regis Healthcare’s ratio of 20.16x is trading slightly above its industry peers’ ratio of 18.87x, which means if you buy Regis Healthcare today, you’d be paying a relatively reasonable price for it. And if you believe that Regis Healthcare should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Regis Healthcare’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Regis Healthcare?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Regis Healthcare’s earnings over the next few years are expected to increase by 23%, 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? REG’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 REG? 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 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 REG, 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Regis Healthcare. You can find everything you need to know about Regis Healthcare in the latest infographic research report. If you are no longer interested in Regis Healthcare, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.