Renewi plc (LON:RWI) isn’t the biggest company out there, but it has seen significant price action on the LSE over the past few months, climbing to highs of £8.30 and falling to lows of £5.66. Some stock price movements may present investors with a better opportunity to get into the stock and potentially buy it at a lower price. One question to be answered is does Renewi’s current trading price of £5.66 reflect the true value of the small-cap? Or is it currently undervalued and presenting us with an opportunity to buy? Let’s take a look at Renewi’s prospects and value based on the latest financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Renewi
What is the chance in Renewi?
Great news for investors –– Renewi still trades at a fairly reasonable price based on my price multiples model, which compares the company’s price-to-earnings multiple to the industry average. I used price-to-earnings in this case because there isn’t enough transparency to forecast its cash flows. The stock’s ratio of 12.5x is currently well below the industry average of 33.77x, meaning it’s trading at a cheaper price compared to its peers. What’s more interesting is that Renewi’s stock price is quite volatile, which gives us more buying opportunities as the stock price could go lower (or rise higher) in the future. This is based on its high beta, which is a good indicator of how much the stock is moving relative to the rest of the market.
What growth will Renewi generate?
Future prospects are an important consideration when looking to buy a stock, especially if you’re an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a great price is always a good investment, so let’s also take a look at the company’s future expectations. With expected earnings growth of 64% over the next few years, the future looks bright for Renewi. It looks like there is more cash flow on the horizon for the stock, which should result in a higher stock valuation.
What this means for you:
Are you a shareholder? With the RWI currently below the industry’s PE ratio, it may be a good time to start accumulating more of your holdings in the stock. With a positive outlook on the horizon, this growth doesn’t appear to be fully priced into the share price yet. However, there are other factors to consider such as capital structure that could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on RWI for a while, now might be the right time to get into the stock. The prosperous future earnings prospects are not yet fully reflected in the current share price, which means it is not too late to buy RWI. However, before making any investment decisions, you should consider other factors such as the strength of the balance sheet in order to make an informed investment decision.
So if you want to delve deeper into this stock, it’s important to consider all of the risks it faces. Case in point: We discovered it 3 warning signs for Renewi you should be aware of this.
When you are no longer interested in Renewi, you can use our free platform to view our list of over 50 other high growth potential stocks.
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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.