Is It Time To Consider Buying The Gorman-Rupp Company (NYSE:GRC)?

The Gorman-Rupp Company (NYSE:GRC), might not be a large cap stock, but it saw a decent share price growth of 20% on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. Less-covered, small caps sees 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? Today we will analyse the most recent data on Gorman-Rupp’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Gorman-Rupp

Is Gorman-Rupp Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 18.36% above our intrinsic value, which means if you buy Gorman-Rupp today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $32.87, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Gorman-Rupp has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Gorman-Rupp generate?

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. In the upcoming year, Gorman-Rupp's earnings are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? GRC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on GRC, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 while earnings quality is important, it's equally important to consider the risks facing Gorman-Rupp at this point in time. You'd be interested to know, that we found 1 warning sign for Gorman-Rupp and you'll want to know about it.

If you are no longer interested in Gorman-Rupp, 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.