Is Now An Opportune Moment To Examine Redrow plc (LON:RDW)?

Redrow plc (LON:RDW), is not the largest company out there, but it saw a decent share price growth in the teens level on the LSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Redrow’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Redrow

What Is Redrow Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12% below my intrinsic value, which means if you buy Redrow today, you’d be paying a fair price for it. And if you believe the company’s true value is £5.02, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Redrow’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 Redrow?

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. 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 -4.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Redrow. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? RDW seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial 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 RDW for a while, now may not be the most optimal 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. Furthermore, 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 RDW should the price fluctuate below its true value.

If you'd like to know more about Redrow as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Redrow (of which 1 is a bit unpleasant!) you should know about.

If you are no longer interested in Redrow, 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.