PCC Rokita SA (WSE:PCR), is not the largest company out there, but it led the WSE gainers with a relatively large price hike in the past couple of weeks. 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 PCC Rokita’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is PCC Rokita worth?
According to my valuation model, PCC Rokita seems to be fairly priced at around 9.3% below my intrinsic value, which means if you buy PCC Rokita today, you’d be paying a fair price for it. And if you believe the company’s true value is PLN83.79, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that PCC Rokita’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 PCC Rokita 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for PCC Rokita, at least in the near future.
What this means for you:
Are you a shareholder? PCR seems fairly priced 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 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 PCR 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. 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 crystalize your views on PCR should the price fluctuate below its true value.
If you want to dive deeper into PCC Rokita, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for PCC Rokita (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.
If you are no longer interested in PCC Rokita, 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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