Should You Investigate Reka Industrial Oyj (HEL:REKA) At €3.14?

Reka Industrial Oyj (HEL:REKA), is not the largest company out there, but it received a lot of attention from a substantial price movement on the HLSE over the last few months, increasing to €4.10 at one point, and dropping to the lows of €3.07. 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 Reka Industrial Oyj's current trading price of €3.14 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 Reka Industrial Oyj’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 Reka Industrial Oyj

Is Reka Industrial Oyj still cheap?

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. 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 Reka Industrial Oyj’s ratio of 19.02x is trading slightly below its industry peers’ ratio of 20.06x, which means if you buy Reka Industrial Oyj today, you’d be paying a reasonable price for it. And if you believe that Reka Industrial Oyj should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Reka Industrial Oyj’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 kind of growth will Reka Industrial Oyj 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. Reka Industrial Oyj'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? REKA’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at REKA? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on REKA, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for REKA, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To help with this, we've discovered 4 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Reka Industrial Oyj.

If you are no longer interested in Reka Industrial Oyj, 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.