Regional Management Corp. (NYSE:RM), which is in the consumer finance business, and is based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$34.02 at one point, and dropping to the lows of US$25.75. 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 Regional Management’s current trading price of US$26.75 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 Regional Management’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Regional Management worth?
According to my valuation model, Regional Management seems to be fairly priced at around 13.36% above my intrinsic value, which means if you buy Regional Management today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $23.60, there’s only an insignificant downside when the price falls to its real value. What’s more, Regional Management’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of Regional Management look like?
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. Regional Management’s earnings over the next few years are expected to increase by 27%, 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? RM’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 financial strength of the company. 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 RM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Regional Management. You can find everything you need to know about Regional Management in the latest infographic research report. If you are no longer interested in Regional Management, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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