While RCM Technologies, Inc. (NASDAQ:RCMT) 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 NASDAQGM. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine RCM Technologies’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What Is RCM Technologies Worth?
Good news, investors! RCM Technologies is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that RCM Technologies’s ratio of 7.59x is below its peer average of 17.58x, which indicates the stock is trading at a lower price compared to the Professional Services industry. What’s more interesting is that, RCM Technologies’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from RCM Technologies?
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 a relatively muted profit growth of 4.2% expected over the next year, growth doesn’t seem like a key driver for a buy decision for RCM Technologies, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since RCMT is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on RCMT for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RCMT. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 2 warning signs for RCM Technologies (1 is a bit unpleasant!) that we believe deserve your full attention.
If you are no longer interested in RCM Technologies, 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.
RCM Technologies, Inc. provides business and technology solutions in the United States, Canada, Puerto Rico, and Serbia.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
|Analysis Area||Score (0-6)|
Read more about these checks in the individual report sections or in our analysis model.
Flawless balance sheet with outstanding track record.