At US$49.66, Is It Time To Put Rush Enterprises, Inc. (NASDAQ:RUSH.B) On Your Watch List?

While Rush Enterprises, Inc. (NASDAQ:RUSH.B) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Rush Enterprises’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Rush Enterprises

What is Rush Enterprises worth?

Great news for investors – Rush Enterprises is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 9.59x is currently well-below the industry average of 15.47x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because Rush Enterprises’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 Rush Enterprises?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -2.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Rush Enterprises. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although RUSH.B is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to RUSH.B, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on RUSH.B for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Rush Enterprises has 4 warning signs (and 1 which is a bit concerning) we think you should know about.

If you are no longer interested in Rush Enterprises, 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.