Should You Think About Buying Ruth's Hospitality Group, Inc. (NASDAQ:RUTH) Now?

Ruth's Hospitality Group, Inc. (NASDAQ:RUTH), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$19.26 at one point, and dropping to the lows of US$14.94. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ruth's Hospitality Group's current trading price of US$15.95 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ruth's Hospitality Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Ruth's Hospitality Group

What's The Opportunity In Ruth's Hospitality Group?

Good news, investors! Ruth's Hospitality Group 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 Ruth's Hospitality Group’s ratio of 13.19x is below its peer average of 19.24x, which indicates the stock is trading at a lower price compared to the Hospitality industry. Although, there may be another chance to buy again in the future. This is because Ruth's Hospitality Group’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.

What does the future of Ruth's Hospitality Group look like?

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 a relatively muted profit growth of 8.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Ruth's Hospitality Group, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since RUTH 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on RUTH for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RUTH. 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.

So while earnings quality is important, it's equally important to consider the risks facing Ruth's Hospitality Group at this point in time. In terms of investment risks, we've identified 1 warning sign with Ruth's Hospitality Group, and understanding it should be part of your investment process.

If you are no longer interested in Ruth's Hospitality Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.