Let's talk about the popular Raytheon Technologies Corporation (NYSE:RTX). The company's shares received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Raytheon Technologies’s outlook and valuation to see if the opportunity still exists.
Is Raytheon Technologies still cheap?
Great news for investors – Raytheon Technologies is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $103.39, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Raytheon Technologies’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Raytheon Technologies generate?
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 an expected decline of -8.9% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Raytheon Technologies. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although RTX is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to RTX, 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 RTX for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
If you want to dive deeper into Raytheon Technologies, you'd also look into what risks it is currently facing. Our analysis shows 4 warning signs for Raytheon Technologies (2 are potentially serious!) and we strongly recommend you look at these before investing.
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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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