While Rambus Inc. (NASDAQ:RMBS) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. With many analysts covering the 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 Rambus’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Rambus?
Great news for investors – Rambus is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $20.00, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Rambus’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Rambus?
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. Rambus' earnings over the next few years are expected to increase by 99%, 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? Since RMBS is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on RMBS for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RMBS. 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 buy.
So while earnings quality is important, it's equally important to consider the risks facing Rambus at this point in time. For example, we've found that Rambus has 3 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.
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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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