What Is Ritchie Bros. Auctioneers Incorporated's (NYSE:RBA) Share Price Doing?

Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Ritchie Bros. Auctioneers’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Ritchie Bros. Auctioneers

What's The Opportunity In Ritchie Bros. Auctioneers?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Ritchie Bros. Auctioneers’s ratio of 22.4x is trading in-line with its industry peers’ ratio, which means if you buy Ritchie Bros. Auctioneers today, you’d be paying a relatively reasonable price for it. In addition to this, it seems like Ritchie Bros. Auctioneers’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Ritchie Bros. Auctioneers?

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 negative profit growth of -7.1% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ritchie Bros. Auctioneers. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? RBA seems priced close to industry peers 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on RBA, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on RBA for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 gel your views on RBA should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Ritchie Bros. Auctioneers at this point in time. Every company has risks, and we've spotted 2 warning signs for Ritchie Bros. Auctioneers (of which 1 is significant!) you should know about.

If you are no longer interested in Ritchie Bros. Auctioneers, 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.