At UK£0.14, Is It Time To Put Renold plc (LON:RNO) On Your Watch List?

While Renold plc (LON:RNO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the AIM over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Renold’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Renold

Is Renold still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.1% below my intrinsic value, which means if you buy Renold today, you’d be paying a reasonable price for it. And if you believe the company’s true value is £0.16, 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 Renold’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 Renold?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 a relatively muted revenue growth of 0.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Renold, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in RNO’s future outlook, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on RNO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Renold, you'd also look into what risks it is currently facing. For instance, we've identified 6 warning signs for Renold (1 is potentially serious) you should be familiar with.

If you are no longer interested in Renold, 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. 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.
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