Is It Time To Consider Buying Russel Metals Inc. (TSE:RUS)?

Russel Metals Inc. (TSE:RUS), might not be a large cap stock, but it led the TSX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Russel Metals’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Russel Metals

What's The Opportunity In Russel Metals?

According to my valuation model, Russel Metals seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Russel Metals today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth CA$34.15, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Russel Metals’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.

What kind of growth will Russel Metals generate?

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. However, with an extreme expected decline in the top-line over the next couple of years, near-term growth is certainly not a driver of a buy decision. Even with a larger decline in expenses, it seems like high uncertainty is on the cards for Russel Metals.

What This Means For You

Are you a shareholder? Currently, RUS appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on RUS for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on RUS should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Russel Metals and you'll want to know about it.

If you are no longer interested in Russel Metals, you can use our free platform to see our 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.