Why Russel Metals Inc. (TSE:RUS) Could Be Worth Watching

Russel Metals Inc. (TSE:RUS), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the TSX. 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 Russel Metals’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Russel Metals

What Is Russel Metals Worth?

Great news for investors – Russel Metals is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is CA$45.63, but it is currently trading at CA$35.20 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Russel Metals’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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.

Can we expect growth from Russel Metals?

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 expected decline of -18% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Russel Metals. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although RUS is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to RUS, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on RUS for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Russel Metals.

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.