Is Now An Opportune Moment To Examine Real Matters Inc. (TSE:REAL)?

Real Matters Inc. (TSE:REAL), is not the largest company out there, but it saw significant share price movement during recent months on the TSX, rising to highs of CA$9.78 and falling to the lows of CA$5.58. 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 Real Matters' current trading price of CA$5.58 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 Real Matters’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 Real Matters

What's the opportunity in Real Matters?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.01x is currently trading slightly below its industry peers’ ratio of 14.1x, which means if you buy Real Matters today, you’d be paying a reasonable price for it. And if you believe Real Matters should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Real Matters’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Real Matters look like?

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. However, with a negative profit growth of -12% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Real Matters. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? REAL seems priced close to industry peers right now, 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 REAL, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on REAL for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This 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 REAL should the price fluctuate below the industry PE ratio.

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. Case in point: We've spotted 2 warning signs for Real Matters you should be aware of.

If you are no longer interested in Real Matters, 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.