Is It Too Late To Consider Buying Renishaw plc (LON:RSW)?

Renishaw plc (LON:RSW), might not be a large cap stock, but it saw significant share price movement during recent months on the LSE, rising to highs of UK£55.65 and falling to the lows of UK£43.68. 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 Renishaw's current trading price of UK£44.74 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Renishaw’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 Renishaw

What is Renishaw worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 29.21x is currently trading in-line with its industry peers’ ratio, which means if you buy Renishaw today, you’d be paying a relatively sensible price for it. In addition to this, it seems like Renishaw’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Renishaw?

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. With profit expected to grow by 23% over the next couple of years, the future seems bright for Renishaw. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? RSW’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 financial strength of the company. Have these factors changed since the last time you looked at RSW? 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 RSW, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for RSW, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Renishaw has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Renishaw, 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.